Currently Not Collectible Status

If you cannot afford to pay your tax bill, you may be able to stop IRS collection actions by getting your account marked as currently not collectible. When you’re on CNC status, the IRS will not garnish your wages or seize your assets. However, you must apply to get CNC status, and it requires detailed information about your finances. 

To see whether you’re qualified for this sort of tax liability relief, contact Damiens Law Firm, PLLC today. Our tax attorneys can work with the IRS to ensure that you are granted the time you need to rebuild your financial stability if paying. Contact us at (601) 476-1361 today to set up a free consultation.

Key Takeaways

• Currently not collectible status – when the IRS pauses collections on a taxpayer’s account temporarily because of financial hardship. 
• Application – Taxpayers have to show that they can’t afford their tax bill through financial documentation.
• Exceptions – If you meet certain exceptions, you can get CNC status without a full financial disclosure.
• Possible tax forgiveness – If you’re on CNC status for more than 10 years, the IRS cannot collect after that time because of the statute of limitations.
• Alternatives – Other options for tax resolution include a payment plan, partial payment installment agreement, offer in compromise, and others.

What Is IRS Currently Not Collectible Status?

The CNC designation essentially means that the IRS has determined that you are unable to pay your tax liability, and as a result, they will not take any collection action against you for a period of time. 

This status can provide invaluable relief for taxpayers who are struggling to make ends meet. However, CNC status isn’t permanent. The IRS will require you to pay your tax liability when your financial situation improves, unless your account stays in CNC until the statute of limitations has expired, which is 10 years.

If you are currently struggling to pay your tax liability, reach out to a tax professional to see if currently not collectible status is an option for you.

Who Qualifies for Currently Not Collectible Status?

To qualify for CNC status, taxpayers must first prove that they are unable to pay their tax bill. 

Once the IRS determines that you can’t pay your tax liability based on the information provided, the agency will typically agree to temporarily suspend collection action. They will notify you of your status change typically with Letter 4624C, Case Closed — Currently Not Collectible, which confirms your CNC status. 

Here is an overview of the IRS CNC requirements:

• Taxpayers would be confronted with a financial catastrophe if they were required to pay their tax liability.
• Taxpayers must undergo an in-depth financial evaluation, including:
  • Examining current finances
  • Determining whether you are unable to pay your taxes without creating undue hardship

If you are approved for CNC status, the IRS will stop trying to collect your liability for a period of time. This will give you a chance to get back on your feet and improve your financial situation. 

Note that the IRS may require that you provide updated financial information periodically, and they may eventually resume their collection efforts if your situation changes.

How to Request Currently Not Collectible Status

First, contact the IRS to let them know your situation or talk with a tax attorney. In most cases, the IRS will require you to prove that you’re experiencing financial hardship, and you will likely have to fill out IRS forms that provide details about your finances, including income and expenses. 

Generally, you will share your financial details by filing Form 433-F (Collection Information Statement). But, in some cases, individuals may need to file Form 433-A, while businesses may need to file Form 433-B. 

Here’s what you’ll need to provide on your collection information statement:

General Information

• Personal and contact information (name, Social Security number, address, phone number)
• Business information, if applicable

Assets and Income Details

• Bank account information (e.g., checking, savings, money market) and institution details
• Investments (e.g., trusts, certificates of deposit, retirement plans, stocks)
• Cryptocurrency
• Real estate property
• Other assets such as vehicles or whole life policies
• Credit card debt details
• Business financial information, if applicable
• Employment details (e.g., employer name, wages)
• Non-wage household income (e.g., rental income, self-employment income)

Monthly Necessary Living Expenses

• Food and personal care expenses
• Medical costs
• Transportation expenses
• Housing and utilities costs
• Other (e.g., student loan payments, child care, retirement)

The IRS will then review everything carefully and compare your financial situation to your outstanding tax liability. Remember that your tax balance will include penalties and interest you’ve accrued since you missed the payment deadline.

Collection Financial Standards

The IRS has a set of Collection Financial Standards that the agency uses to review cases and figure out if someone can pay their tax debt. One thing the IRS will look for is whether you can afford necessary living expenses, which include costs like food, clothing, and other necessities. Other applicable standard costs include housing and utility expenses, out-of-pocket healthcare costs, and transportation costs.

National standards set expense limits for food, clothing, housekeeping supplies, personal care products and services, and miscellaneous expenses. National standards also apply to out-of-pocket healthcare expenses, while local standards apply to transportation, housing, and utilities.

These standards help set a “budget” that the IRS relies on when reviewing someone’s financial information. If the taxpayer spends money on nonessential expenses that are over the budget, those funds will likely be regarded as disposable income, which the IRS believes can be used to pay back your taxes. Expenditures must be genuinely required for your and your family’s health and well-being.

Examples of National Financial Standards

For example, as of 2024, the IRS financial standard for out-of-pocket healthcare expenses is $83 if you are under 65 and $158 if you are over 65. If you spend over these thresholds, you must explain why, or the IRS will just assume that you’re overspending and could devote that extra money to your tax bill. 

Examples of Local Financial Standards

Many standards are based on the local level, as the cost of living varies from area to area. For example, as of 2024, the IRS’s local standard for housing expenses in Madison County, MS is $2,203 per month for a family of three, but it’s only $1,402 per month for a family of three in Jefferson County, MS. In both cases, these numbers include rent/mortgage and utilities.

Our tax debt lawyer in Mississippi can help you understand whether you qualify for currently not collectible status. We help you understand tax law and ensure your paperwork accurately reflects your financial hardship.

Exceptions to the Application Process

Most people must file a collection information statement to get CNC status, but if your tax debt is under a certain level (number not published by the IRS), you can avoid this requirement if one of the following applies:

• You have a terminal illness.
• You are incarcerated.
• Your only income is Social Security, welfare, or unemployment.
• You are unemployed with no income. 

What Happens When My Account Is in CNC Status?

When your account is in currently not collectible status, the IRS will not take any collection actions. Generally, there will be a federal tax lien filed if the debt is over a certain threshold, but the IRS will not attempt to garnish your wages or seize your assets. The agency will seize any tax refunds you get while you’re on CNC status.

If you file a tax return that shows your income has gone over a certain level, the IRS can remove the currently not collectible status from your account, and then, the agency can resume collection actions. 

However, if you stay on CNC status until the debt expires, which happens on the collection statute expiration date 10 years after assessment, the debt will become uncollectible, and you will not be required to pay it.

How Long Does CNC Status Last?

There isn’t one set period for CNC status. The length of time this status can last will depend on each taxpayer’s case and situation. Some people have CNC for only six months or a couple years, while others have this status essentially forever.

The IRS statute of limitations for collections is 10 years, so if your account stays in CNC status for this long, the agency can no longer attempt to collect what you owe. When you’re dealing with a significant financial hardship, going this route could mean you’ll eventually be forgiven of your tax debt.

Pros and Cons of Currently Not Collectible Status

The main advantage of currently not collectible status is that the IRS stops collection actions against you. You will not face wage garnishment or asset seizure while your account is marked as CNC. 

However, there are a few downsides including the following:

• Federal tax lien – The IRS will file a federal tax lien that will apply to your current and future assets. If you sell, the IRS will have a right to the proceeds.
• Long application – You must share details about all of your finances to get CNC status.
• Detailed financial review – Depending on how much you owe, the IRS will do public records searches, pull a credit report, and complete other research before granting you CNC status.
• Not permanent – If your financial situation improves, the IRS can resume collection actions. 

A tax attorney can help you weigh the pros and cons and determine if this is the best option for you.

Other Options for Tax Resolution

CNC status is not the only way to find some relief from taxes. There are a few other options you can apply for, whether you simply cannot afford your tax bill, or you can afford it but you’re looking to make payments on your balance over time. Talk to a tax professional about these options that can help your situation:

Installment Agreement

This is a very common option for when taxpayers want to spread out payments instead of covering their bill in a lump sum. Most of the time, you can apply for a payment plan online when you realize you can’t pay your full balance at once. The IRS will likely agree to a payment plan where you pay monthly installments until the balance is paid off.

Note that a lot of people agree to payment plans when they could have qualified for CNC status or an offer in compromise. When that happens, they end up paying a tax bill that they could have avoided, and they often end up in default on their payment plans. Talk with a tax attorney to make sure you’re making the right choice for your situation.

Partial Payment Installment Agreement

A special type of payment plan, the partial payment installment agreement (PPIA), allows you to eventually get some of your balance forgiven. You pay your monthly payment amount and stay in good standing, and then after the statute of limitations has expired, the IRS will no longer try to collect the remaining balance.

For example, say you have a high tax liability that you can’t afford. Even with a payment plan, where you pay an agreed-upon amount each month, you still won’t have the balance paid off within the Collection Statute Expiration Date (CSED), which is 10 years from when the tax was assessed. You agree to pay the set monthly amount until the CSED, and at that time, the rest of the balance isn’t collected from the IRS.

Offer in Compromise

Many taxpayers pursue the offer in compromise, or OIC, option. This also requires you to show the IRS that you are unable to cover your full tax liability. You essentially send in an offer to the IRS that represents what you can afford. If IRS officials agree that the amount is all that they can reasonably expect to collect from you, they’ll agree to accept it and settle your debt. 

Penalty Abatement

When you haven’t filed your taxes on time or you continue to fail to pay off your balance, you’ll incur penalties and interest on top of your tax bill. You can then apply for penalty abatement. There are several types of administrative waivers, with the most common being first-time penalty abatement, or first time abate. 

Prior to your current penalties, if you have a three-year history of filing and paying taxes on time, and you didn’t get other penalties during that time, you will qualify for failure to pay, file, or deposit penalties.

Innocent Spouse Relief

The IRS also offers taxpayers something called innocent spouse relief. This applies if you file jointly with your spouse, your spouse underreports their income or takes another action to avoid paying their full tax bill, but you weren’t aware of their misrepresentation. The IRS will grant you this type of relief if they find that you didn’t know or had no reason to know about the discrepancy.

FAQs about Currently Not Collectible Status

Will the IRS Forgive My Tax Debt?

The IRS doesn’t have a general tax forgiveness program, but it has several forms of tax relief to help taxpayers who can’t pay their tax bill. Currently not collectible status is one option, where the IRS will suspend collection actions against you until your financial situation improves. If your account stays in CNC status for 10 years, which is the CSED, the IRS will no longer try to collect your remaining balance.

What Is the IRS Temp Collection Delay?

The temporary delay on tax collections is known as CNC status, or currently not collectible. Remember that this status is only temporary. Once you can afford the tax bill with a better financial situation, you’ll be required to pay your balance plus any penalties and interest.

What CNC Form Do I Have to Submit?

There is no set CNC application. When requesting relief, you will usually send in a collection information form such as Form 433-F, which outlines your income, expenses, debt, assets, and other details. The IRS reviews this to determine whether to grant you CNC status.

What Does Currently Non-Collectible Mean?

Currently non-collectible or not collectible is a status that the IRS gives to taxpayers who have shown they can’t afford their tax bill due to financial hardship. This status is only temporary, however, in most situations.

Find Expert Help with CNC Status 

Though the IRS offers several forms of tax relief, CNC status can be the best way forward when you’re dealing with financial troubles. The IRS will temporarily pause collection actions against you until you’re back on your feet.

Don’t try to deal with these complex situations on your own. Work with the tax attorney at Damiens Law to find out how we can assist you with examining your situation, breaking down tax laws, and guiding you through complicated IRS forms and processes.

We can also help with tax problems like unfiled returns, tax audits, tax levies, tax audit defense, and applying for installment agreements and tax resolution options. 

Contact Damiens Law today to set up a consultation. Call us at 601-202-4745 to get started.