IRS CNC but not in collection yet

[Gretel]

Is it a bad idea to approach the IRS for CNC status if the account is not in collection yet?

[S T]

Great question Gretel, as I have a similar situation. I am filing the return, Taxpayer not able to pay - financial status has changed.

Hoping someone will post to both of our questions.

Sandy

[taxea]

If you expect the CNC status to last as there is no expectation of an increase in income presently known then I certainly would. I have a client whose husband quit working due to a bout with cancer. He has been unemployed for over 3 years and I file a CNC each tax year and will continue to do so until he goes back to work.

[Gretel]

If you expect the CNC status to last as there is no expectation of an increase in income presently known then I certainly would. I have a client whose husband quit working due to a bout with cancer. He has been unemployed for over 3 years and I file a CNC each tax year and will continue to do so until he goes back to work.

If wasn't the question, when to file and not filing too early is.

[DaveinTexas]

Never too early

If wasn't the question, when to file and not filing too early is.

I'm just curious, if the client qualifies for CNC, would they qualify for an OIC? How much do they owe? You wouldn't have to wait until Collections to attempt the CNC status but I would recommend having a 433-A filled out before you contact the IRS because they will require this information. Know the National Standards too, here: http://www.irs.gov/Individuals/Colle...cial-Standards

I'd recommend doing the math on an Offer, as this makes the problem go away in 2 years, instead of delaying the problem (CNC).

Also, the IRS may issue a Notice of Federal Tax Lien if the client owes greater than $10,000 and the account will be placed into CNC so a heads up to the client will be appreciated. Lastly, if you have never filed an Offer before, here is a great place to start and access form letters/sample Offer forms: http://taxclinic.law.gsu.edu/clinic-forms/

That last link is a great tool to have. I have referred (just for further information) some clients to the SMU low income tax clinic for help with Offers. These are really for clients that can't afford my fees to prepare an Offer or CNC/Appeals, etc. Your local college/university may offer the same service.

Good luck!

[Gretel]

Thanks, great information. Form 433-A is ready to go accompanied by a detailed spreadsheet and bank statements. Client has more expenses than income and this will never change and tax lien is not an issue. Because of his illness he probably dies before the 10 years are up. He only owns a small piece of land, jointly with another person making the QSV close to zero.

What brought this question about is my conversation with the state of Montana. I decided to tackle them first since an installment payment to them is accepted by the IRS. MT neither accepts the Federal standards nor do they offer an OIC. The person I talked with stressed the point that this is a current tax liability but was not willing to explain why and how that makes a difference. I thought the only important factor is remaining income.

[taxea]

your original post did not say the return had not been filed. Once it is filed i would submit the CNC rather than waiting for a notice from the IRS collection office.