Having your accounts placed in Suspended Status or more commonly referred to as Currently Not Collectable (CNC) status is one of many options available when dealing with the IRS. In short this means your accounts have been determined to be Currently Not Collectable based on your current financial situation.
In order for your accounts to be placed in CNC, you must furnish the IRS with a comprehensive financial statement that shows your allowable personal living expenses are more than your household income. If your accounts qualify to be placed in CNC status, you are not required to make any monthly payments on the balance you owe the IRS. If the IRS has not already filed a tax lien against you, one will be filed prior to theIRS employee closing your case as CNC.
The IRS employee will also input an income code to your account. For example, if your income is $50,000 per year at the time your account is placed in CNC status, the IRS employee may determine that you need to make $60,000 per year before you can make any payments on your balance. The employee will input a code that will remove your account from CNC status when your income reported on a subsequent filed tax return shows $60,000 or more in adjusted gross income. Your accounts will then be reactivated and assigned to the Collection Division for updated financial information. If your future income does not exceed the amount input for follow up, your accounts could potentially stay in CNC status until the statue for collection expires.
Even if your income does not exceed the amount input for follow up, if you file a future tax return and fail to pay the tax owed on the return, all accounts previously placed in CNC status will be reactivated and assigned for collection actions.
Accounts placed in Currently Not Collectable can have positive and negative effects on you. The positive effects are that no payments are required with the potential for the statue for collection expiring. The negative effects are that a tax lien will be filed, you must file and pay all future returns, interest and penalty will continue to accrue to your balance, any refunds on future returns will be applied to your balance and the potential for IRS reactivating your accounts at a future date for collection actions.
CNC is one of the options our Associates may use in protecting our clients. However, as always, early advanced planning is necessary. The earlier we are contacted and retained, the more planning we can help our client accomplish and the greater the potential for having your accounts placed in Currently Not Collectable.