02 Oct Can N.J. give my Homestead Rebate to the IRS?

Q. I owe a large balance to the IRS from 2011 and 2012. It is in not collectible status, but New Jersey has started to seize my Homestead Rebate to pay the debt. Is there anything I can do?
— Still working

A. There is something you can do.

First, let’s clarify what “currently non-collectible,” or CNC for short, really means.

CNC status is an IRS administrative determination status that suspends IRS collection efforts, said David Ritter, chair of the tax practice at Brach Eichler in Roseland.

“CNC status may be available if based on the taxpayer’s asset, equity, income and expenses the taxpayer has no apparent ability to make payments on the outstanding tax liability,” Ritter said. “The test is that the payment would create an economic hardship.”

You have to contact the IRS and update and supplement the “currently non-collectible(“CNC”)” status.

Ritter said many factors are taken into account for this determination, but you would start by submitting Form 433-F.

The Homestead Rebate program is administered by the New Jersey Division of Taxation, but the division also collects taxes for several agencies including the IRS, Ritter said. This could come from sources such as state income tax refunds and yes, Homestead Rebates.

Ritter said before the New Jersey Division of Taxation pays the funds to the IRS, the reader will be notified and will have a right to a hearing – which you must request.

“Before the hearing, the reader must establish its CNC status with the IRS and inform the state,” Ritter said. “If the funds have already been seized there are several methods that the reader may use, including but not limited to filing of a Form 9423 Collection Appeal Request.”

There are other procedural options depending where you are in the collection process. We recommend you talk to a tax professional who can assess your specific situation.

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