Will The Irs Keep My Refund If I Have An Installment Agreement

In a Nutshell

If you're granted IRS currently not collectible status, the IRS will no longer try to collect taxes from you via banking concern account levies, wage garnishments, or seizures of your other belongings. If you can't beget to pay anything toward your IRS tax debt, y'all'll need to request CNC status. Otherwise, you could run into your paycheck garnished or have funds in your bank account taken from y'all due to a bank account levy.

You're getting tax bills from the IRS, but you can't afford to pay them. The IRS is threatening a lien or levy. You learn that y'all could negotiate a payment understanding with the IRS. Only, you lot can't afford to pay anything toward a monthly payment plan. Thankfully, there's another solution bachelor to you. When you can't afford to make any payment to the IRS, you may be eligible for currently not collectible (CNC) condition.

What Is Currently Non Collectible (CNC) Status And Is Information technology Right for Me?

If you're granted IRS currently non collectible condition, the IRS will no longer endeavor to collect taxes from yous via banking concern account levies, wage garnishments, or seizures of your other property. If yous can't afford to pay annihilation toward your IRS tax debt, you'll demand to request CNC status. Otherwise, y'all could run into your paycheck garnished or take funds in your bank account taken from you due to a bank account levy.

When your account is classified as currently not collectible condition, the IRS will still take your taxation refund. Information technology may file a Notice of Federal Tax Lien against you, but probably won't unless you owe more than $x,000. It won't engage in other IRS collection activities like levies while you have uncollectible status.

Currently non collectible status isn't a permanent solution for most taxpayers. Penalties and involvement go on to accumulate on your dorsum taxes while y'all're in non-collectible status. If your financial situation improves, the IRS may inform you that it intends to restart drove deportment. The IRS will have a trigger it refers to every bit a "endmost code" to revoke currently not collectible status if your income reaches a certain level.

If you're granted non-collectible status, information technology's a expert thought to inquire the IRS for information on the lawmaking assigned to you. If you're assigned a revenue officer, enquire that officeholder. If you're not assigned a acquirement officer, call the number that'southward on the notices you're receiving. If your fiscal situation has improved, the IRS may notify you that information technology plans to restart collection action. Even if you lot don't file an income taxation return, the IRS will know about any income you receive that's reported on a West-ii or 1099.

If your income increases and triggers a closing code, you'll need to contact the IRS about an installment agreement or other settlement option. Of class, something else could take changed in your life that would allow yous to keep your non-collectible condition despite an increase in your income. For example, you may have a new dependent that may cause the IRS to raise your code to $34,000, thus assuasive you to remain under uncollectible status.

If your financial situation will improve soon and you lot will have to start repaying the IRS, requesting CNC status might not be your all-time option. There are better tax settlement solutions for virtually taxpayers long-term, fifty-fifty if CNC status serves every bit a helpful, temporary stopgap. These solutions include installment agreements, partial payment installment agreements (PPIA), or offers in compromises (OIC).

With that said, if your income doesn't improve earlier the cease of the IRS 10-year statute of limitations for collection and y'all remain under CNC status during this time, the IRS will write off your revenue enhancement debt. CNC status is oft the all-time tax relief measure out for those who have a permanent issue affecting their income-earning ability. A permanent inability is a good example of this scenario.

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4 Reasons That The IRS May Grant CNC Status

To exist granted CNC status, you must testify to the IRS that paying anything toward your tax liability would cause y'all financial hardship. Financial hardship doesn't hateful financial inconvenience. The threat of genuine fiscal hardship exists when paying your dorsum taxes would cause you to be unable to afford basic necessities similar nutrient or healthcare.

1. There's little time left until the collection statute expiration date (CSED). This scenario could assist you lot obtain currently not collectible status because yous might non be able to pay the IRS without economic hardship in the little fourth dimension left earlier the CSED.

2. Your only source of income is government assistance. Government assistance such every bit the SNAP programme, disability, Social Security, and public housing programs assistance Americans meet their minimum needs. If your income is only from these programs, information technology's unlikely that y'all have sufficient disposable income to brand whatever payments toward your taxation debts. Of course, if your financial state of affairs improves, you will lose CNC status and the IRS will try to collect from you lot over again.

iii. Yous're unemployed and unemployment compensation is your merely source of income. You lot're likely to become uncollectible condition in this situation because unemployment compensation is usually less than your wages were. Using unemployment bounty or any course of government assistance to pay your back taxes is using authorities funds to pay regime debts. That is, the government would be paying itself.

4. You're suffering from financial hardship. The 3 preceding examples are types of financial hardship, just those aren't an all-inclusive list. In that location are many reasons for financial hardship. Any your reason, the IRS will want proof of the state of affairs likewise as your fiscal data.

The IRS isn't going to stop collection processes merely considering yous have little time left on your statute of limitations, you're living on government aid, or your only income is unemployment compensation. You need to exist able to prove that paying the IRS minimum acceptable payment of $25 per month would crusade economic hardship. The minimum payment necessary for an installment understanding would be your revenue enhancement liability divided by 72 months or the number of months until the CSED whichever is less.

If $25 is less than the maximum payment y'all can afford, you lot may exist able to go a Partial Payment Installment Understanding (PPIA) at $25 per month. If you can't even make a $25 per month payment without economical hardship, you should be granted CNC status.

How Exercise You Prove Financial Hardship?

You will have to prove economic hardship to be granted currently not collectible condition. Y'all'll submit this proof by filing IRS Form 433. You'll apply this form to give the IRS your financial data. In that location are a few variations of the Form 433 financial statement. When seeking uncollectible condition, the IRS volition almost likely desire the Grade 433-F Drove Information Statement. The 433-F is the simplest version of 433 with just 2 pages. Exist ready to prove the numbers on your 433 with documents such equally depository financial institution statements, utility bills, etc.

The IRS will consider the information on the 433 to run into if your income is plenty to make installment agreement payments. The IRS will utilise its ain guidelines. The IRS uses national standard expenses to determine the minimal amount needed for food, vesture, and other necessary living expenses. The IRS likewise has guidelines for what your expenses for housing and utilities should be. These guidelines are based on your household size and where you live. These guidelines are specific to every county in the The states.

The IRS also has transportation standards for public transportation costs or vehicle ownership costs (car payments) and operating costs (gas, insurance, maintenance) for each region of the country. There'due south a national standard for out-of-pocket healthcare expenses. The IRS considers other necessary monthly living expenses such as health insurance, life insurance, and childcare. If, after applying all these deductions to your monthly income, your total positive income isn't enough to make the minimum payments toward your tax liability, you should exist granted uncollectible status.

Permit'south Summarize…

CNC is a good option if y'all tin can't afford to pay anything toward your taxation debts. While in not-collectible condition, the IRS won't garnish your wages or levy on your banking concern account. It still may record a lien confronting your property. Your taxation debt continues to grow since penalties and interest continue to accrue on your taxation debt. If your financial state of affairs improves, the IRS may remove y'all from non-collectible status and restart collections activities. For these reasons, for most taxpayers, CNC status is a temporary solution. The people who may employ CNC as a permanent solution are those with weather condition that will foreclose their income from improving. Or, at least their income won't improve by the collection statute expiration date (CSED).

Once your financial condition improves, you'll want to go an installment agreement, a fractional payment installment understanding, or an offer in compromise with the IRS. Unlike non-collectible condition, these solutions will reduce or eliminate your tax liability. CNC status can only eliminate your tax liability when your financial condition doesn't improve by the CSED.

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Written Past:

Attorney John Coble

John Coble has expert every bit both a CPA and an Attorney. John's legal specialties were revenue enhancement law and bankruptcy police. Earlier starting his ain firm, John worked for police force offices, bookkeeping firms, and one of America's largest banks. John handled near 1,500 defalcation cases in the eig... read more well-nigh Attorney John Coble