As tax season approaches, some people may already feel the stress of figuring out how they will pay their taxes. In some instances, there are a few available solutions.
Applying for Currently Not Collectible status may be an option in some cases. Before making the filing, there are a few important things to understand about this status.
What it is
CNC status is a tax status that designates an account is not available for collection. Parties who do not have any additional or minimal funds after paying necessary living expenses may be eligible for this status. Those who may qualify must apply by submitting a financial statement to the IRS. Once the IRS makes sure that the account is eligible for the status, an agent makes the appropriate designation.
What it does
While an account is in CNC status, the IRS ceases all collection attempts on the account. This can provide people with needed breathing room, and may aid in them getting to a more lucrative financial standing. However, if a party's income increases high enough, the IRS may deem the account ineligible to maintain the status.
What it is not
CNC status does not forgive the debt; rather, it creates a deferment. Therefore, the person still owes the debt, as well as any interest and late fees that continue to accumulate. Therefore, in some cases, an individual may face future payments once the IRS lifts the CNC status. Only after a person remains in this status for 10 years does the IRS forgive the balance. Considering these things, it is important that parties stay up to date with the current tax laws and their effect on their personal tax accounts.