The CNC tax program, or IRS’ Currently Not Collectible status, is essentially placing your case into a $0 payment plan per month. You may have heard about the CNC tax program on the radio or even gone to cnctaxprogram.com, only to talk to a high pressured salesperson who is selling you a program they have no idea about.
Here is a breakdown of how it works:
1) Your financials are gone through and the IRS determines you have no ability to pay the debt
2) They place your account into “Currently Not Collectible” status
3) The IRS request no payment from you
4) You still owe the debt, and the IRS still sends you notices regarding the debt
5) If liens were not already filed against you, and you owe over $10,000, liens will be filed on your credit report. They will be also filed against any properties you own, and against any cars you own. The lien is different from a levy in the fact that they do not take anything. It is just a declaration of their interest and your debt.
You usually have a fairly low income or a lot of dependents to get into CNC. A person making $15/hour or less generally will get CNC. A person making $50,000 in California with 3 dependents usually would qualify as well. However, it is case by case and must be looked at individually to make a proper determination.
When is CNC a good option?
CNC is a good option to get your case out of collections right away. However, most clients that get CNC can get an Offer In Comprise as well (settlement on the whole debt), so leaving your case in CNC is sometimes only doing half the job. If you have a lot of equity in a home, sometimes CNC is your best option. The IRS won’t accept the settlement due to your equity, but leaving it in CNC keeps the IRS off your back.
It should be noted that the IRS has 10 years from the date a tax debt is assessed to collect on it, plus additional time if a bankruptcy, offer in compromise, or payment plan request is pending. Therefore, leaving your case in CNC until the debt expires is sometimes the best option.