Currently Not Collectible Status CNC for the IRS
In today’s challenging economic climate, it’s more common than ever for individuals to fall behind on their tax obligations. Many taxpayers find themselves in a situation where they not only owe back taxes but are also unable to afford even modest monthly payment plans. If you’re facing this kind of financial hardship, there is relief available. The IRS may grant you what’s known as “Currently Not Collectible” (CNC) status—also referred to as Status 53—if you meet specific criteria.
What Does “Currently Not Collectible” Mean?
Being granted Currently Not Collectible status means that the IRS has officially determined you do not have the financial means to pay your tax debt at this time. Once you’re placed in CNC status, all active collection efforts by the IRS must stop. This includes wage garnishments, bank levies, and the filing of federal tax liens.
However, it’s important to understand that CNC status does not erase your tax debt. The amount you owe will continue to accrue interest and penalties while your account is in this temporary status. Think of it as a pause in collection—not a cancellation of the debt.
Each year while you’re in CNC status, the IRS will send you a notice reminding you of your outstanding balance. To maintain your eligibility, you must remain compliant by continuing to file your future tax returns on time. If you’re owed a refund in any year while in CNC status, the IRS will automatically apply it to your existing tax liability.
How Long Can You Stay in CNC Status?
Once you’re granted CNC status, the IRS doesn’t forget about your debt—it monitors your financial situation. Specifically, they watch for increases in your reported income. If your financial situation improves enough, you may be removed from CNC status. In such a case, the IRS may ask you to submit a new financial disclosure to reassess your ability to pay.
There is no fixed time limit for how long someone can remain in CNC status. Legally, you can be in this status for at least one year, but if your income remains low and your financial condition doesn’t improve, you could stay in CNC status until the IRS’s collection statute expires—typically 10 years from the date of the tax assessment. If the statute runs out before you’re removed from CNC status, your tax debt may be permanently forgiven.
What Should You Do After Being Placed in CNC Status?
Once you’re approved for Currently Not Collectible status, the next step is to consider your long-term strategy. One option is to have your tax attorney pursue an Offer in Compromise (OIC)—a program that allows qualifying taxpayers to settle their tax debts for less than the full amount owed. While not everyone in CNC status will qualify for an OIC, many do, and it can be an effective way to resolve your tax issues permanently.
Alternatively, if you’re close to the expiration of the 10-year statute of limitations, it might be wiser to do nothing. As long as the IRS cannot collect the debt before the statute expires, the liability will be forgiven. A tax attorney can help you evaluate the timing and advise whether taking action or waiting is more advantageous for your specific situation.
How Do You Qualify for CNC Status?
To qualify for Currently Not Collectible status, you must prove to the IRS that you are unable to pay your tax debt without sacrificing essential living expenses. This requires submitting a comprehensive financial disclosure that details your income, expenses, and assets. The IRS will scrutinize this information to determine whether any surplus income exists that could be applied toward your tax debt—or if you possess assets that could be sold to cover it.
You’ll need to gather and submit a range of documentation to support your claim, including:
- Paycheck stubs for the past month
- Statements for all other monthly income, including pension benefits, spousal or child support, and Social Security benefits Property tax statements for all property owned, date of purchase and purchase price
- Utility bills, such as electric, gas, water and phone/internet
- Monthly mortgage bill or lease
- Most recent credit card statements
- Tax bill, mileage and monthly payment for each car owned
- Statements of owned assets, like stocks and bonds
- Receipt or bills for any other monthly expenses, such as food, child care, medical expenses and spousal or child support payments
The key is to show that after meeting your basic living expenses, you have no disposable income—and no significant assets that could be liquidated to pay your tax bill.
Why Hire a Tax Attorney?
Navigating the IRS’s requirements for CNC status can be complex and intimidating. A seasoned tax attorney can assess your financial situation quickly and accurately, helping you determine whether CNC status is the right solution for you. If so, they can compile and submit the necessary paperwork, and negotiate directly with the IRS on your behalf.
The attorneys at Delia Law have years of experience helping clients resolve their tax issues. Whether you’re seeking Currently Not Collectible status, need protection from aggressive IRS collection tactics, or want to explore a settlement through an Offer in Compromise, we’re here to help. Call us today at (619) 639-3336 for a free consultation. We look forward to helping you.
This blog post is not intended as legal advice and should be considered general information only.
