The IRS is rarely lenient and hardly ever makes allowances for people who are unable to pay their taxes for any reason. However, there are some circumstances in which the IRS is empathetic and offers clauses to discuss to settle.
To qualify for such settlements, you will typically need to demonstrate that you lack the money necessary to reimburse the IRS fully. Additionally, these conversations are only possible if the amount you owe them does not exceed a predetermined threshold.
However, let’s say you do not have enough money to pay them back in instalments or at a reduced amount either, what would happen in that scenario? Well, there is a provision for this case known as the Currently Not Collectible status.
What is the currently not collectable status?
The currently not collectable IRS status is applicable when the IRS agrees with you that you do not have sufficient funds to pay them back in any manner. The IRS establishes that you are currently not capable of paying your taxes and finding enough funds to support your everyday expenses, necessary for your survival.
In this scenario, the IRS considers your account to be CNC (Currently Not Collectible), in which case they will not use any means to collect from you.
Who is eligible for the CNC status?
When you submit a request to the IRS, they will often carry out a comprehensive examination to see if you have any assets to sell or if you are in a position to take out a loan to pay them back. They won’t give you the option of placing your account under the CNC status until they reach a good result.
However, they will routinely carry out an evaluation each year. If they notice that your financial situation has improved, they will ask you to return your loan based on the findings of this assessment.
Although it is not a good idea to avoid paying back the IRS, if you genuinely find yourself in a fix and cannot pay them back, they are willing to work with you and put your account on hold until you are in a financial position sound enough to pay them back.