The official meaning of this notice is the “IRS Notice CP71A – Annual Balance Due Reminder Notice. The CP71A notice is an annual statement of the total unpaid balance due for an account in currently “non-collectible” status. This simply means that the IRS sent you this notice to remind you of the amount you owe in tax, penalty and interest.

There are three main reasons why you would receive Notice CP71A from the IRS. They are:

  • Taxpayers have an unpaid tax balance, but their accounts have been placed in the status of “currently non-collectible”.
  • Taxpayers are being sent a required annual statement of their balance due by the IRS.
  • Even though the IRS doesn’t require taxpayers to pay immediately, the notice still gives taxpayers a date to pay, if they want to keep additional penalties and interest from accumulating.

STEPS TO TAKE

The first step to take is to read the CP71A Notice carefully and understand it. The notice will explain how much money you owe on your taxes. You can seek the assistance of a tax professional if you don’t fully understand the notice sent to you by the IRS.

Once you have read and understood the notice either by yourself or with the help of a tax expert and you agree with notice, you can contact the IRS and let them know you would like to set up an installment agreement plan. You can contact them by calling the phone number provided on the top right hand corner of the IRS letter sent to you. Afterwards, the IRS will give you a certain period of time to pay back the taxes owed.

However, if you don’t agree with the notice sent to you, you will need the help of a tax expert again to help devise the best strategy to use to handle your situation with the IRS. They will lay out all the options you have and suggest the one to take that best suits your case.

If the IRS sees that you are struggling financially, you may as well qualify for an IRS Offer In Compromise. The IRS will simply settle for taxes so you pay less than the usual amount.

NOTE – The IRS Notice CP71A is not considered a tax bill even though many United States taxpayers think of it as one. The IRS will continue to send you letters showing the outstanding balances you owe.

If your tax situation escalates and nothing is done about it, it is very likely that your passport will be revoked.

MEANING OF CURRENTLY NON COLLECTIBLE STATUS

The status “Currently Non Collectible” is a status an irresponsible taxpayer can have with the IRS after the IRS temporarily halts any active collections against the taxpayer. The status “Currently Non Collectible” will stop levies, threatening letters and collection enforcement until your current financial situation improves. The IRS will do this if the taxpayer has demonstrated that collections have put them in financial hardship and they cannot afford to pay their back taxes. In most cases, the IRS won’t grant this status to a taxpayer until they are compliant.

As earlier stated, when a taxpayer is placed under IRS Currently Not Collectible (CNC) status, tax levies are stopped and all collection and enforcement activity will be temporarily suspended. Once the IRS have seen and agreed that you’re unable to pay off your balance due to financial hardship and put your account into “Currently Not Collectible” status, they are required to essentially leave you alone, but they will still send you an annual bill notice and you can no longer make continuous collection attempts. This means no more seized wages, deferred debt payment, credit reporting, stoppage of calls and letters etc.

Taxpayers should keep in mind that once their account acquires “Currently Not Collectible” status, it doesn’t mean that their debts are gone just like that.You will still be expected to pay off your tax debt once your financial situation improves. Although the IRS considers you Currently Not Collectible given your current financial situation, they will later reevaluate your standing and capability to pay your tax liabilities in the future.

Once the taxpayer is placed into a “Currently Not Collectible” status, the IRS will monitor their tax returns every year and see if their income has increased. If the taxpayer’s income has increased, the IRS will remove the taxpayer from the CNC status and ask them to complete a new financial statement to determine if they are able to make payments.

Also, even though you save money through deferred payments and lifted garnishments, you’ll ultimately be paying more in the end, because interest and penalties will continue to accrue on whatever outstanding balance is due.

Generally, the IRS has up to ten years to attempt to collect on taxes owed, after which point the statute of limitations are enforced. Financially based Currently Not Collectible’s do not extend this statute of limitations.

One important thing about being considered for a Currently Not Collectible is that the IRS Statute of Limitations is still running for those back taxes owed. The statute of limitations lasts 10 years from the date the taxes are due. If they are not collected in this period, they can no longer collect on these amounts.

In order to remain non-collectible, the IRS requires that taxpayers file and pay all of their future taxes on time. This means that if taxpayers are self-employed and has previously had trouble setting aside money to pay their taxes, they have to do that to stay non-collectible.

Apart from being current on your future taxes, you should also be aware of some things if you are under the non-collectible status. They are:

  • Increases in your income indicate that you might no longer be in economic hardship. The IRS will be monitoring your future tax returns. If there are significant increases in your income, the IRS will assume you have the ability to pay your taxes and they will require a new collection statement.

The IRS sometimes marks a follow-up date for review of your account when they place your account in “Currently Not Collectible” status.