How Does IRS' Currently Not Collectible Work?

Currently Not Collectible (CNC) is a status that the IRS may assign to a taxpayer’s account if the taxpayer is unable to pay their tax debt. This means that the IRS will not take any collection action against the taxpayer for a period of time. 

This status may be assigned for various reasons, such as financial hardship or unemployment.

How It Works

The currently-not-collectible status can provide some relief from the immediate threat of collections activity from the IRS. However, this does not mean that the tax debt disappears. The taxpayer will still owe the past-due tax, plus interest and late penalties will continue to accrue.

The IRS may keep any future tax refunds you are owed until your balance is paid off. This is called a “refund offset.” The IRS may also file a Notice of Federal Tax Lien against your property, which will appear on your credit report. This will let creditors know that you owe an outstanding balance to the IRS.

A tax professional can help you understand your options for dealing with your tax debt, including whether you might be eligible for “currently not collectible” status. They can also help you calculate monthly payments on an installment agreement or the likely settlement amount if you were to ask for an offer in compromise.

CNC status is not permanent and the IRS may remove you from this status if your financial situation improves.

The Requirements for CNC

If paying your taxes would result in serious privation, then the IRS may designate your tax debt as currently not collectible. This means that the IRS will not actively try to collect the debt from you at this time. However, interest and penalties will continue to accrue on your unpaid taxes, and the statute of limitations on collections will not be paused.

To see if you qualify, the IRS will look to see if you meet one or more of the following requirements:

  • You have only a few more years left on the 10-year statute of limitations the IRS has to collect your tax debt.
  • You make less than $84,000 a year.
  • Your living expenses fall within IRS guidelines.
  • You have very little money left over after paying for your basic living expenses.
  • The only money you have coming in is from Social Security, welfare, or unemployment benefits.
  • You are not working and do not have any other money coming in.

The IRS will place a code on your account when you qualify for currently not collectable status. This code tells the IRS when to review your file to see if your circumstances have changed. The code is based on your annual income. For example, if you make $30,000 a year and the IRS approves you for CNC status, they may place a code on your account when you make $36,000 a year.

The IRS has a closing code that is used to determine when someone’s non-collectible status will be reviewed. This code will tell you what income level will cause the IRS to follow up with the person.

The amount of time you can stay on CNC status is determined by how much money you earn and how quickly your economic situation improves.

The Bottom Line

Currently Not Collectible is a status that the IRS may assign to a taxpayer’s account if the taxpayer is unable to pay their tax debt. This status may be assigned if the taxpayer is unemployed, has a low income, or is facing financial hardship. Once an account is assigned this status, the IRS will not attempt to collect the debt for a while.

Get IRS debt relief with the help of Axiom Tax Resolution Group. We have trusted tax professionals that are ready to find a permanent solution to your IRS tax problems. Get in touch with us.