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What is Currently Not Collectible Status?

The IRS (Internal Revenue Service) uncollectible status, formally known as Currently Not Collectible (CNC), is a designation given to taxpayers who are unable to pay their tax debt due to financial hardship. When a taxpayer is classified as Currently Not Collectible, the IRS temporarily suspends collection actions against them.

Here are some key points about IRS uncollectible status:

1. Financial Hardship: To qualify for Currently Not Collectible status, the taxpayer must demonstrate that paying their tax liability would cause significant financial hardship. This is typically assessed by providing detailed financial information to the IRS.
2. Temporary Status: CNC status is not a permanent solution to tax debt. It is granted for a period during which the taxpayer's financial situation prevents them from making payments. The IRS periodically reviews the taxpayer's financial status to determine if they are still unable to pay.
3. Collection Actions Suspended: While in CNC status, the IRS generally suspends collection actions such as levies and garnishments. However, penalties and interest on the outstanding tax debt continue to accrue.
4. Tax Returns Still Required: Even in Currently Not Collectible status, taxpayers are still required to file their tax returns on time each year.
5. Reassessment and Termination: The IRS may periodically reassess the taxpayer's financial situation. If the taxpayer's financial condition improves, the IRS may terminate the Currently Not Collectible status and resume collection efforts.
6. Not a Settlement: Currently Not Collectible status does not discharge the tax debt. The taxpayer still owes the IRS the amount due, but collection efforts are temporarily suspended due to financial hardship.

How Do obtain Currently Not Collectible Status

The Taxpayer will complete a Form 433 and file it with the IRS Collection Division. The 433 is a form that collects financial data of the taxpayer to determine if they qualify for Currently Not Collectible status.

Who is a Candidate for Currently Not Collectible Status?

Realistically, anyone who qualifies CNC can use it as an effective Tax Resolution tool but some primary candidates that I have found come to my Cary, NC office include –

1. A taxpayer for whom the 10-year collection statute will expire soon,
2. Taxpayers who are not compliant and under threat of levy. While most tax resolution alternatives require the taxpayer be in tax compliance, CNC status does not.
3. Taxpayers who don’t qualify for an Offer In Compromise but do qualify as CNC.

Now that you have a better understanding of what CNC is, and its pros and cons, you can determine whether or not this option is right for you. If you’re experiencing financial hardships or simply want a reprieve from collection actions while you sort out how to pay your debt, then this status can give you that relief.

There are also many other options available to you for tax settlement with the IRS. Contact us today to schedule a consultation. We’ll review your tax situation and provide you with our expert recommendation on which tax settlement option is best for you.