CTRS Currently Not Collectible Status and Financial Hardship 3

Question 1

What is the primary distinction between Currently Not Collectible status and an Offer in Compromise based on Doubt as to Collectibility?

Accepted Answer

An OIC permanently resolves the tax debt for a negotiated amount, while CNC is a temporary suspension that leaves the full debt intact

Answer

An OIC accepted by the IRS permanently resolves and extinguishes the underlying tax liability for the agreed amount, while CNC status is a temporary deferral that leaves the full balance owed with interest accruing.

Question 2

Which IRS employees most commonly make the initial determination to place an account in Currently Not Collectible status?

Accepted Answer

Automated Collection System (ACS) representatives and Revenue Officers

Answer

CNC determinations are typically made by ACS telephone representatives for routine cases or by Revenue Officers during field contact when a taxpayer demonstrates they cannot pay without hardship.

Question 3

What type of hardship qualifies a taxpayer for a levy release under IRC Section 6343(a)(1)(D), which is closely related to CNC eligibility?

Accepted Answer

The levy creates an undue economic hardship that prevents the taxpayer from meeting basic living expenses

Answer

IRC Section 6343(a)(1)(D) requires levy release when the levy is creating economic hardship — meaning the taxpayer is unable to meet basic, reasonable living expenses — which mirrors the standard for CNC eligibility.

Question 4

When documenting a client's financial hardship for a CNC request, which of the following is NOT typically required documentation?

Accepted Answer

A signed IRS Form 2848 Power of Attorney

Answer

Form 2848 (Power of Attorney) is needed to represent the taxpayer but is not part of the financial hardship documentation itself; bank statements, income proof, and liability documentation are the core financial evidence.

Question 5

A tax professional's client is in CNC status. The client receives an inheritance of $40,000. What is the professional's responsibility regarding this changed financial circumstance?

Accepted Answer

The professional should advise the client of the potential material change in financial condition that may affect CNC status and consider proactive resolution options

Answer

Ethical and effective representation requires that the tax professional advise the client of how a material change in financial condition like an inheritance could affect CNC status, and explore whether an OIC or installment agreement may now be appropriate.

(CTRS) Certified Tax Resolution Specialist Practice Test

(CTRS) Certified Tax Resolution Specialist Practice Test

CTRS Currently Not Collectible Status and Financial Hardship 3