Persons with lower income who owe income taxes can often qualify for “Currently Not Collectible” (CNC) status and not be required to pay their past due IRS taxes. Therefore, it is not that difficult to obtain CNC status if you are in the lower-income bracket.
You can qualify if your income is within 200% of the poverty line (in 2022, this means $2,265/month for a single person or $3,052 for a couple). If you have income near or below this level, you can contact the IRS and apply for CNC status. If your income is close to or below the poverty level, it is straightforward to get on CNC status. The 100% poverty level for 2022 is $1133/month for one person or $1526/month for a couple. If your income is higher than the 100% poverty level but less than 200% of the poverty line, you must show the IRS that you don’t have extra money to pay your taxes. In most instances, you can get on CNC status over the phone. However, the IRS can garnish a bank account or wages. Therefore, we always suggest that if you qualify for CNC status, you immediately take steps to contact the IRS and get on CNC status.
How to Apply
1. Write out your budget stating housing costs, food, housekeeping supplies, clothing, personal care, transportation, out-of-pocket medical costs, and miscellaneous. Look at the IRS-approved standards below. Using these standards, make sure your total expenses equal or exceed your income and that your expenditure in each category does not exceed the IRS standard. Don’t underestimate your needs.
Many people live on far less than the standards allowed. If you have the income, your budget should provide for better food, adequate heat, clothing, medicines, and other basics within the IRS guidelines. Make sure your budget shows no extra income. Otherwise, the IRS agent might try to persuade you that you can pay something when you really can’t. Here is a guide to IRS approved budget standards:
- Food: one person $400, two persons $724
- Housekeeping supplies: one person $41, two persons $76
- Apparel & services: one person $92, two persons $150
- Personal care products & services: one person $42, two persons $76
- Miscellaneous: one person $148, two persons $266
Housing and utility standards are different for each state. Here is a link to an IRS website with the standards for each state.
The transportation standard for one car is $533. Here is a link to an IRS website on transportation standards for different parts of the country.
Medical out of pocket standards: $68 for each person under 65 and $142 for each person over 65. Here is a link for more information.
2. After you have written out your budget, call the number on the upper right-hand corner of your tax notice. If there is no phone number on your letter, use 800-829-3903. You might be on hold for an hour or longer, and you may have to try to get through to the IRS for several days.
3. When the IRS agent answers, you will be asked for your name and Social Security number. Explain you are calling about being placed on “Currently Not Collectible” status. You don’t need to be afraid talking to the IRS agent. They are well trained. Be courteous and friendly.
4. Be prepared to give the agent your budget numbers. Remember your budget numbers should be at or above your income. If your income is at or below the poverty level, it will go fast. Once again, even if you haven’t been spending that much, you can still allow yourself expenses within the standards set by the IRS. You don’t have to have extra money to make a payment for the past due taxes.
5. If your income is above the poverty line, the IRS agent might ask you to complete IRS form 433-F, depending on how much you owe in taxes. That form is simply a written budget you fill out. Most of the time, the IRS will take that information over the phone despite what you might read elsewhere. So have the budget numbers prepared before you call. However, if the form is requested, the agent will give you time to complete that form, and then you will call back. The IRS will send you the form or download it on the internet. However, you won’t be required to fill out that form despite what you might have read on the internet most of the time.
6. The agent will tell you that you qualify for CNC status. The status will normally last for a year and then be renewed.
7. If you buy a home, you can normally still qualify for CNC status. The IRS may file a tax lien, but they will not take your home. The lien will expire after ten years or when the tax is over ten years old. Don’t ask questions about that as the agent isn’t qualified to answer.
8. If you are buying a home, the house payments hopefully are within or close to the standards for the state where you live in the link above.
9. If you are asked if you can borrow money on any equity in the home, you should explain that you would not be able to refinance or get another mortgage because of your debt and poor credit.
What About Future Tax Refunds?
The IRS can take any future refund even if you are on CNC status. You can avoid that by claiming enough exemptions so you won’t get a refund. That way, you will get a little more in your check each month instead of losing your refund when you file taxes.
HELPS is a national nonprofit law firm that helps seniors and disabled who owe debt they can’t afford to pay. We represent seniors to stop unwanted collector contact. We also educate our clients on how they can maintain their financial independence. Sometimes seniors owe taxes they can’t afford to pay. If they don’t do anything, the IRS can offset 15% of their Social Security. However, almost all lower-income seniors can qualify for CNC status. CNC status is also available for persons with lower income regardless of age.
If you’d like to see a video on this topic, please watch these videos that Eric Olsen, Director of HELPS, did with Seniorliving.org on how lower-income seniors can get on CNC status. Of course, the same principles apply to taxpayers of any age.