Currently Not Collectible

What Is Currently Not Collectible Status?

Currently Not Collectible (CNC) is a status the IRS assigns to taxpayer accounts when it determines that the taxpayer has no ability to make payments toward their tax debt. This is not a debt forgiveness program; the debt remains on the books and penalties and interest continue to accrue. However, the IRS suspends all active collection efforts, including wage levies, bank levies, property seizures, and collection phone calls. CNC status is appropriate for taxpayers experiencing genuine financial hardship, including those with low income, significant medical expenses, disability, unemployment, or other circumstances that leave no disposable income after covering basic living necessities. The IRS determines eligibility by comparing your income against your allowable living expenses using the Collection Financial Standards (national and local expense standards published by the IRS). If your allowable expenses meet or exceed your income, you qualify for CNC. The most powerful aspect of CNC status is that the 10-year Collection Statute Expiration Date continues to run while you are in CNC. If your financial situation does not improve before the CSED expires, the entire tax debt is legally extinguished.

How Currently Not Collectible Status Works

1. 1

   Financial Hardship Documentation

   A comprehensive financial disclosure is prepared using Form 433-A (Collection Information Statement) or Form 433-F, documenting all sources of income, monthly living expenses, assets, and liabilities. Supporting documents including pay stubs, bank statements, bills, and medical records are gathered.

2. 2

   IRS Collection Financial Standards Analysis

   Your expenses are evaluated against the IRS Collection Financial Standards, which set allowable amounts for housing, transportation, food, clothing, and other necessities based on your family size and geographic location. This analysis determines your monthly disposable income as the IRS calculates it.

3. 3

   CNC Request Submission

   Your representative contacts the IRS (Automated Collection System or assigned Revenue Officer) to request CNC status, presenting the financial documentation that demonstrates zero or negative disposable income. The representative negotiates to ensure all legitimate expenses are recognized.

4. 4

   IRS Determination

   The IRS reviews the financial information and either grants or denies CNC status. If granted, the account is coded with a closing code that indicates the reason for CNC (hardship, inability to locate taxpayer, etc.). The IRS may file a federal tax lien even when granting CNC status to protect its interest.

5. 5

   Periodic Review

   The IRS may review your CNC status periodically, particularly if your income changes. Common triggers for review include a significant increase in W-2 or 1099 income reported to the IRS. If your financial situation improves, the IRS may remove CNC status and require payment. If it does not improve, CNC continues until the CSED expires.

Who Qualifies for Currently Not Collectible Status?

CNC status is designed for taxpayers in genuine financial hardship. Common qualifying situations include unemployment or underemployment with minimal income, disability or serious medical condition that limits earning capacity, retirement with limited fixed income, high medical expenses that consume most income, and recent job loss or business failure. The IRS evaluates your situation using Collection Financial Standards for expenses like housing (based on your county), transportation (national standards), food and clothing (based on family size), and out-of-pocket health care. If these allowable expenses plus any mandatory payments (court-ordered payments, student loans, etc.) equal or exceed your gross income, you have zero disposable income and qualify for CNC. Even taxpayers with some assets may qualify if those assets cannot readily be liquidated to pay the tax debt (for example, a modest primary residence with little equity).

• Your monthly allowable expenses equal or exceed your monthly income
• You cannot afford to make any payment toward your tax debt without financial hardship
• You have filed all required tax returns
• You can document your income and expenses with supporting evidence
• You are not hiding assets or income from the IRS

Benefits of Currently Not Collectible Status

The primary benefit of CNC status is complete cessation of IRS collection actions. No wage garnishments, no bank levies, no property seizures, and no collection calls. This provides immediate financial breathing room for taxpayers who are struggling to meet basic living expenses. The strategic benefit of CNC is even more significant: because the 10-year Collection Statute Expiration Date continues to run during CNC, taxpayers whose financial situations do not improve may have their entire debt legally expire. For example, a taxpayer who is placed in CNC with 6 years remaining on their CSED may never have to pay any portion of the debt if their financial situation remains the same. Even taxpayers who eventually come out of CNC because their income increases benefit from the elapsed time, as they will owe for a shorter remaining period. CNC can also serve as a stepping stone to an Offer in Compromise, as taxpayers in CNC with significant debt and a long remaining CSED are often strong OIC candidates.

Currently Not Collectible vs. Offer in Compromise

CNC and OIC both provide relief for taxpayers who cannot pay their full tax debt, but they work in fundamentally different ways. CNC pauses collection and hopes the debt expires before your financial situation improves, while an OIC permanently settles the debt for a reduced amount. CNC requires no payment, while an OIC requires at least a minimal offer payment. The best choice depends on your financial situation, the amount of time remaining on your CSED, and your long-term income prospects.

How to Request Currently Not Collectible Status

1. 1

   Document Your Financial Situation

   Gather comprehensive documentation of your income and expenses, including recent pay stubs or proof of income, bank statements for the last 3 months, monthly bills and expenses, medical expense records, and any documentation of disability, unemployment, or other hardship factors.

2. 2

   Complete Form 433-A or 433-F

   Prepare the IRS Collection Information Statement (Form 433-A for detailed situations or Form 433-F for simpler cases) showing all income sources, monthly expenses categorized by type, asset values, and outstanding liabilities. This form is the foundation of your CNC request.

3. 3

   Contact the IRS or Have Your Representative Call

   Call the IRS at 1-800-829-1040 or have your authorized representative contact the IRS on your behalf. Explain that you are requesting CNC hardship status because your monthly expenses equal or exceed your income and you cannot afford any payment toward the tax debt.

4. 4

   Submit Financial Documentation as Requested

   The IRS agent or Revenue Officer will request specific documents to verify your financial claims. Submit these promptly. The more thorough and organized your documentation, the faster the CNC determination will be processed.

5. 5

   Maintain Filing Compliance

   While in CNC status, you must continue to file all required tax returns on time. Failure to file can result in removal from CNC status and resumption of collection actions. Adjust your withholding to avoid owing additional tax in future years.