4 Ways To Get Currently Not Collectible Status From the IRS

Granted IRS “currently not collectible” (CNC) status stops aggressive collection actions. The IRS will no longer garnish your wages or levy your bank account. If you can’t afford to pay anything toward your tax debt, you need CNC status. Without it, you risk losing your paycheck or bank funds.

What Is Currently Not Collectible (CNC) Status And Is It Right for You?

CNC status halts IRS collection activities. No more wage garnishments. No more bank account levies. No property seizures.

You must request CNC status if you can’t afford payments. Without it, you face wage garnishment or a frozen bank account.

The IRS will still take your tax refund during CNC status. It may file a Notice of Federal Tax Lien if you owe over $10,000. But it won’t pursue other aggressive collection actions.

Is CNC Status Permanent?

No. CNC status isn’t a permanent solution for most taxpayers. Penalties and interest continue growing on your back taxes.

Here’s the exception: If your income doesn’t improve before the IRS 10-year collection deadline expires, the IRS writes off your debt. CNC works best for people with permanent income issues, like permanent disability.

Your financial situation improves? The IRS may restart collections. The agency uses a “closing code” to revoke CNC status when your income hits certain levels.

Ask the IRS about your assigned code. Contact your revenue officer if you have one. Otherwise, call the number on your IRS notices.

What if Your Financial Situation Improves?

The IRS tracks your income through W-2s and 1099s. You don’t need to file a return for them to know. Income increases that trigger your closing code end CNC status.

You’ll need to contact the IRS about payment options. An installment agreement or settlement option becomes necessary. Sometimes life changes like new dependents justify keeping CNC status despite higher income.

Will your finances improve soon? CNC status might not be your best choice. Better tax settlement solutions exist for long-term relief.

These solutions include:

• Installment agreements
• Partial payment installment agreements (PPIA)
• Offers in compromise (OIC)

Need help managing your IRS debt? Our partner Cambridge Credit Counseling can create a payment plan that fits your budget.

When Does the IRS Grant CNC Status?

The IRS grants CNC status when paying taxes causes serious financial hardship. Not just tight budgets or money stress. Real hardship means you can’t cover basic living expenses.

You must prove you can’t afford payments. The IRS wants evidence that even $25 monthly would strain your finances.

Can you afford small monthly payments but not the full amount? Consider a partial payment installment agreement (PPIA). You pay smaller amounts without hardship while settling your debt.

Here are four common reasons the IRS grants CNC status.

The IRS Is Running Out of Time To Collect

The IRS has 10 years from assessment to collect your debt. That’s called the collection statute expiration date (CSED).

Little time left on the clock? The IRS may grant CNC if you can’t afford payments. Starting a payment plan makes no sense when collection expires soon.

Your Only Income Is From Government Assistance

You rely entirely on Social Security, disability, SNAP, or public housing? The IRS knows your income is limited. You likely have nothing left for tax payments.

Remember: CNC status isn’t forever. Your income increases? The IRS reviews your case and may restart collections.

You’re Unemployed and Only Receiving Unemployment Benefits

Losing your job creates sudden income loss. The IRS may agree collection isn’t appropriate if unemployment is your only income. Especially when tax payments would prevent covering rent, food, or medical care.

You’re Facing Another Type of Financial Hardship

Serious illness, disability, or major income drops all qualify as hardship. The IRS requires proof of your situation. You’ll submit income details, monthly expenses, and asset information. Even small monthly payments must cause real difficulty.

How Do You Prove Financial Hardship?

You must show the IRS that paying taxes causes serious hardship. Submit financial information using IRS Form 433.

The IRS typically requests Form 433-F (Collection Information Statement) for CNC cases. Just two pages long. The simplest version available.

You’ll list your income, expenses, debts, and assets. Provide supporting documents: pay stubs, bank statements, utility bills, rent or mortgage statements.

The IRS compares your monthly income with allowable living expenses. Can you afford any payments? That’s what they determine.

What Are Allowable Living Expenses?

The IRS uses national and local standards to set expense limits. Not just what you actually spend. These guidelines include:

• National standards for food, clothing, and out-of-pocket medical expenses
• Local standards based on location and household size for housing, utilities, and transportation
• Other necessary expenses like health insurance, life insurance, and childcare

Your income after standard expenses isn’t enough for tax payments? The IRS may place your account in CNC status.