Sometimes something as simple as changing your tax status can change your tax liability. All too often, people think IRS debts mean their financial future is ruined. At Damiens Law Firm, PLLC, we want to tell you a different story:
A Columbus, Mississippi couple sought help with their IRS back taxes after receiving an IRS levy on their accounts. Because these taxpayers operated in the farming and forestry business, the IRS was also threatening to seize their land. At that time, their tax liability had ballooned to over $661,000 with interest and penalties. Luckily, they sought our tax law firm’s help, and we were able to step in and communicate with their IRS revenue officer, working out a tax debt resolution that worked for our clients.
When we initially contacted the IRS, the federal agency was requesting the forfeiture of all the taxpayers’ farmland and an installment agreement of $3,000 per month. Given their financial information, our clients could not afford to pay $3,000 per month to the IRS.
Once we stepped in, we were able to get the taxpayers’ business books caught up and create an accurate income statement and balance sheet, thus showing the business’s actual cash flow.
Accurate books and records are an essential step in dealing with an IRS Revenue Officer, and we can help you take this important first step.
Calculating a plan with accurate books and records
With a clear picture of our client’s monthly cash flow, we were able to calculate the taxpayers’ reasonable collection potential based upon their financial situation – particularly their monthly living expenses – and work towards a resolution with the Revenue Officer.
Will Changing Your Tax Status Help?
In this case, Currently Not Collectible (CNC) became the best fit for our client. By helping our client fill out a Form 433, we were able to show that paying off tax liability would result in economic hardship. Put more simply, we showed that our client could not afford to pay back taxes.
By showing financial hardship, we got our client placed in Currently Not Collectible status with the IRS.
This collection alternative is a great option for many people because you pay nothing while you are in it.
What is currently non-collectible status or CNC status?
The Currently Non-Collectible Status is one of the many IRS collection alternatives available to IRS taxpayers. It is advantageous when the taxpayer has older tax debt close to reaching the CSED (Collection Statute Enforcement Date, i.e., the statute of limitations on tax debt). While it does not permanently resolve the debt, unless the statute is about to expire, it will give a taxpayer breathing room for several years – just like it did in the case we described above.
To qualify for non-collectible status, the taxpayer must prove that their monthly income is not sufficient to cover their monthly living expenses, especially when the IRS is trying to collect.
When determining non-collectible status for IRS tax debt, the IRS will review monthly income, necessary living expenses based upon the household, assets, debt, financial hardship, and, particularly, the ability to pay the tax liability in full.
If you think you may qualify for Currently Non-Collectible Status or need another form of tax relief, our firm is here for you.