Currently Not Collectible Status

The "currently not collectible" status is an Internal Revenue Service (IRS) provision through which you can make voluntary monthly payments towards your tax liabilities. Simply put, if the IRS agrees that you do not have enough income to pay towards your tax debts on a monthly basis, your accounts would be placed into a currently not collectible (CNC) status. Under CNC status there is no required payment to be made. Your tax accounts would remain in a CNC status as long as you cannot afford to make monthly payments. The IRS does, from time to time, review the status of your account and may conduct an audit of your financial information to determine if you are currently able to make monthly payments. If you are still unable to make monthly payments, the IRS will keep your accounts in the CNC status. The IRS will send a statement reminding you of an outstanding tax balance.

Prior to requesting CNC status, you should have filed your tax returns for all the years in which you were required to file. You must also be compliant with current year estimated tax payments or tax withholding and must agree to remain compliant in the future.

Information Required for a CNC Status Request

To request a currently not collectible status from the IRS, you must demonstrate that you cannot make monthly payments. What you need to do is to gather the following information for the IRS authorities:

* Copies of your latest pay stubs
* Copies of your most recent statements showing other means of income like Social Security benefits, pension income, spousal support, etc
* A copy of the most recent real estate tax bill for all the properties owned by you
* Copies of your latest utility bills, like bills for electricity, gas, telephone, etc
* A copy of your lease or mortgage statement showing your monthly rent or mortgage payments
* Copies of your latest credit card statements
* Copies of the most recent property tax bill for every car you use
* Proof of any other assets that you may own, such as stocks, bonds, etc
* Proof of any other monthly expenses you incur, such as food and other necessities, daycare, court ordered payments, medical expenses, etc

Form 433 A - A Brief

After you have gathered the required documents you now must complete Form 433 A or 433 F for submittal to the IRS. Form 433 F is an abbreviated copy of Form 433 A and is only accepted by the IRS under certain circumstances.

Completing the IRS Form 433 A is a crucial step in submitting a successful request for CNC status. Form 433 A, "Collection Information Statement for Wage Earners and Self-Employed Individuals" is the form used to document your financial situation. The IRS uses this form to determine your Reasonable Collection Potential (RCP) on your tax debts. If your RCP is greater than $0.00 then you will not likely qualify for CNC status. Here is a brief description of the form:

Form 433 A, Section 1: This section is used to enter your personal information, like your name, address, marital status, social security number, date of birth, home phone number, work phone number, driver's license details and spousal information.

Form 433 A, Section 2: This section is used to enter your employment information, like the name and address of your employer, your spouse's employer and address, contact details, duration of employment, occupation type, pay period, and number of exemptions claimed on Form W 4.

Form 433 A, Section 3: This section is used to enter other financial information, like details of current lawsuits, if any, bankruptcies, insurance policies, any anticipated increase/decrease in income, and whether you have resided outside the United States in the last 10 years for a period of 6 months or more.

Form 433 A, Section 4: This section is used to enter personal assets, like bank accounts, money market accounts, government benefit cards and safe deposit boxes. You also need to include the full name and address of the financial institution or credit union where your assets are deposited. Other information you are required to furnish are total cash in hand, 401 K, IRAs, stocks, bonds, mutual funds, etc. In addition, you need to reveal the amount of equity you hold, including credit cards, and any transfers of assets in the past 10 years. In the last portion of this section you must furnish monthly information for income and expenses.

Form 433 A, Section 5 and 6: You are required to complete these sections only if you are self-employed. The information required is the name of your business, EIN, type of business, number of employees, average gross monthly payroll, frequency of tax deposits, total equity, credit cards used, loans, business assets, etc.

Once you have completed Form 433 A, you must follow the instructions on the form and attach all required documentation. If the required documentation is not attached, your request for CNC status will likely be denied.

A CNC status can be difficult to acquire from the IRS. If you wish to pursue CNC status it may be a good idea to hire an Enrolled Agent to assist and represent you. Enrolled Agents are licensed by the IRS and can practice throughout the United States. In order to become an Enrolled Agent an individual must pass the Enrolled Agent Exam which tests their knowledge in all areas of tax preparation and representation of clients.

Fast Forward Academy is a leading publisher of education for enrolled agents and tax professionals. Access to free questions for the enrolled agent exam is available on their website.