The IRS can grant you CNC (Currently Not Collectible) Status if you are found to be unable to pay your tax debt. Once you are granted CNC status, the IRS must stop all collection activities and efforts, including levies (the statutory authority of the IRS to seize property to satisfy a tax liability without going to court) and garnishments. CNC status can be a huge relief to people who are essentially hounded by the IRS to pay their tax debt. After CNC status is granted, the IRS must send an annual statement to you stating the amount of tax still owed and to be repaid when you are in a better financial situation.
In order to receive CNC status from the IRS, you must prove that you do not have any assets that would enable you to pay the tax debt you owe. Essentially, you must prove that you have enough money to pay for the very basic necessities of life and nothing else.
To get the process started, fill out the Collection Information Statement for Wage Earners and Self-Employed Individuals or Form 433-A, which is used by the IRS to determine your reasonable collection potential on your tax debts. You can find a link to this form in the Resources section.
You will need to have the following information to complete Form 433-A: Personal information such as: address, phone number, marital status, dependents, whether you own a home or rent etc. Employer and business information including, address, phone number, any and all income for the prior three months, absolutely all expenses etc.
You will need to report all your liquid assets including bank accounts, investment accounts, credit card accounts, and insurance policies.
Other legal information you need to report to the IRS includes garnishments against your wages, any judgments against you, and whether you have ever filed for bankruptcy. You will need to list all vehicles, real estate, personal and business assets you may own.
Form 433-A is a six-page form that may take you hours to fill it out completely. Try to keep stress and frustration at a minimum as you want to fill the form out correctly. Your tax debt relief depends on it. Not to mention that you will sign Form 433-A under penalty of perjury.
The following documentation must be provided to the IRS in addition to Form 433-A: - Copy of your last tax return - Proof of all current expenses for the last three months, - Statement of all transportation expenses for the last three months, - Statement of health care expenses for the last three months - Proof of any court-ordered payments for the last three months
In order to provide the IRS with all the pertinent information and documentation it requires to stop debt collection activities against you, you will need to have kept meticulous records and documentation of virtually every financial aspect of your life for a long period of time. Save all receipts, invoices, and statements that illustrate your financial situation. You never know when you may be asked for additional proof of income or expenses.
Check the IRS website to find the address where the form should be mailed as it differs from state to state. Note that the statute of limitations on debt collection by the IRS is 10 years. What this means is that if the IRS is unable to collect taxes due within a 10-year period, they must forgive permanently the debt you owe.