Lawrence Lawler: Hi! I am Lawrence Lawler, National Director of the American Society of Tax Problem Solvers. This series has to do with solving common tax problems. We are going to do discuss the Currently Non-Collectable status of a taxpayer.
The IRS, in some instances, will determine that a taxpayer is simply cannot afford to pay what they owe, and they will put them in Currently Non-Collectable status, commonly referred to as CNC within the IRS.
The IRS will look at the taxpayer's financial records and determine that he doesn't have the wherewithal to pay for the necessities of life and therefore will suspend any collection action against him temporarily. They intend to review those things every year to see if the taxpayer's financial position has changed.
A recommendation to taxpayers who are in currently non collectible status might be to investigate doing an Offering Compromise or if they can afford to make some kind of a small payment to start to get rid of the problem, they could look at installment arrangement. Often though with a currently non collectible status, we find the Offering Compromises probably the best solution to their problem, because it will add finality to the financial problem that they have with the IRS, because it resolves the issue and gets it over with, whereas currently non collectible doesn't. In fact in the currently non collectible status the penalties and interest continue to accrue all the time they are in that status.
If their financial position doesn't change that may not mean anything because they can't pay the tax at the level they are right now. If it grows they are not going to be able to pay that either. But of their financial position improves, it has cost them a lot of money to be in that status. So considering an Offering Compromise, adds finality to it. It ends the problem, they make an offer, the IRS accepts it, and now they are a current with all their taxes and they are out of the Currently Non-Collectible status.
One other option, of course, is to file for bankruptcy and see if the taxes can be discharged in bankruptcy.
That pretty much wraps up Currently Non-Collectible. We need to move into the area of appealing IRS actions.