Currently Not Collectible (CNC) status(hardship)
What is Currently Not Collectible Status?
There are times when you may be unable to pay your IRS tax liability due to your current financial situation. In such cases, the IRS may agree to classify your account as "Currently Not Collectible" (CNC) if you’re unable to pay both your tax debt and your basic living expenses. Common circumstances that may justify CNC status include, but are not limited to: economic hardship, unemployment, advanced age, poor health, or bankruptcy.
A Temporary Solution, but …
CNC status offers temporary relief by pausing IRS collection efforts, but it’s important to understand that this status is not permanent. If your financial situation improves, the IRS may resume collection activity.
However, if your account remains in CNC status until the Collection Statute Expiration Date (CSED)—typically 10 years from the date the tax was assessed—your remaining tax debt will be permanently forgiven. This means that as long as you remain compliant and your financial situation remains unchanged, you may continue in CNC status until the IRS can no longer legally collect the debt.
“I own a small business, had specific tax-related legal questions, and am so happy I called Maryam. She is very knowledgeable, kind, and thorough. I had an excellent experience!”
If your financial hardship is not temporary and unlikely to improve, you may want to explore other resolution options such as an Offer in Compromise or a Partial Payment Installment Agreement.
What to expect if the irs places your account in cnc status?
While your account is in Currently Not Collectible (CNC) status, here’s what you should expect:
The IRS will generally not take collection action (e.g., wage garnishments or bank levies), unless new federal tax liabilities arise that could trigger removal from CNC status.
Penalties and interest will continue to accrue on your outstanding tax debt.
Any future tax refunds may be intercepted and applied to your existing balance.
The IRS may file a Notice of Federal Tax Lien (NFTL), which can negatively impact your credit score and hinder your ability to sell or borrow against assets.
The IRS may periodically request updated financial information to determine whether your ability to pay has changed.
You will continue receiving annual balance-due notices from the IRS, even while in CNC status.
How does it work?
what do you need to qualify for a cnc?
You may be required to file any past-due tax returns to bring your account into compliance.
You must submit detailed financial information and supporting documentation to demonstrate your income, expenses, and whether you have access to assets or able to obtain a loan.
You are expected to stay current with all future tax obligations, including making timely Estimated Tax Payments and Federal Tax Deposits.
We can determine if being deemed uncollectible is an appropriate option for you and explain the pros and cons of being placed in CNC status. We have successfully represented the taxpayers before the IRS and obtained CNC status for them, if appropriate. Call us now to schedule an appointment and find out if CNC status is the right option for you.