The IRS Tax Status That Stops IRS Wage Garnishments and Tax Levies in It’s Tracks

There are times when unforeseen circumstances occur leaving a taxpayer in financial crisis. He/she may be finding it difficult to pay for basic necessities like food, clothing, and/or shelter. In these cases, paying owed taxes can become a big burden on the taxpayer.

If a taxpayer is unable to pay taxes, as doing such would create economic hardship for him/her, the IRS has the power to declare the individual’s account as ”uncollectible”. This declaration temporarily stops collections and the ugly things the IRS can do to you such as: wage garnishments, bank levies and seizures. Having the CNC status means that the taxpayer still owes the IRS, but tax payment has been suspended till a time when he/she is no longer in financial hardship.

The uncollectible status does not solve the tax problem as interests and penalties will continue to accrue even as the taxpayer is in this state, but it gives the taxpayer more time to deal with the problem. With that said, many taxpayers throughout the country stay on currently non collectible for several years until the statute of limitation runs out, and the IRS can no longer collect on the taxes. If the tax owed exceeds the statute of limitations dates, the tax is deleted off your IRS account.

In order to get Currently Non Collectible consideration the taxpayer has to provide satisfactorily evidence to prove that paying taxes will place him/her in financial hardship. The IRS will observe the taxpayer’s financial situation from time to time to determine or detect when there’s an improvement in income to start collections again. To this end, the taxpayer may be called by the IRS to provide recent financial documents, as this will help the IRS evaluate his or her financial status.

How Long Does The Not Collectible Status Last?

The Non collectible status is granted on a yearly basis. The IRS will review your case once a year and if there isn’t a negligible increase an income or decrease in expenses an individual can stay on this status for several years.

What documents can serve as proof of financial hardship to the IRS.

The IRS evaluates individuals on a case by case basis to see whether further collections will cause them financial hardship. If you are working with a Revenue Officer a 433-A will need to be filled out in detail. If you aren’t working with a Revenue Officer 433-F will need to be filled out. Additional documents could be requested such as: utility bills, pay stubs and bank statements.

Additional reasons why an account could be placed in CNC include:
  • If the taxpayer does not have assets that he/she can use to pay off the debt.
  • When the taxpayer’s income is less than his expenses.
  • If the IRS is unable to locate the taxpayer or his/her assets.
  • Death of an individual with no considerable estate
  • If collection would leave the taxpayer unable to meet his or her living expenses.
  • If the taxpayer goes into bankruptcy and has no remaining assets.

Can the CNC status be invoked?

Yes, it can. The CNC on its own is a temporary status, aside from this, if the taxpayer fails to file future returns and pay taxes, the CNC status may be invoked. If your present gross earnings are greater than they were when you were placed in CNC, the IRS could declare you as no longer ”uncollectible” and could request updated financials and supporting documents.

Taxpayers should be aware that in many cases, the IRS may file a Tax Lien as part of agreeing to place an account in CNC. Most of the time, this is done when the taxpayer has a tax debt over $10,000.

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