Currently Not Collectable Status (CNC)
Currently Not Collectible (CNC) status with the IRS temporarily suspends IRS collection efforts for the most financially disadvantaged taxpayers.
What is Currently Not Collectible (CNC) with the IRS?
Currently Not Collectible (CNC) status with the IRS is a temporary relief option in which the IRS halts collection efforts because the taxpayer cannot pay their tax debt due to financial hardship. Once in place, this status lasts 12 months. Afterward, the status is reevaluated to determine if the financial hardship remains or if the IRS should begin collection efforts again.
Currently Not Collectible Status (What You NEED to Know!)
If you’re facing financial hardship and can’t pay your tax debt, CNC status can temporarily stop IRS collection actions until you’re able to pay. Interest and penalties will still accrue while in CNC status.
Benefits of Currently Not Collectible Status
- Relief from Collection: The IRS stops aggressive collection actions like wage garnishments, bank levies, and property seizures.
- Peace of Mind: CNC status allows you to focus on improving your financial situation without worrying about IRS enforcement.
- Avoid Financial Hardship: It prevents you from paying tax debt that would cause further financial turmoil.
Who can apply for Currently Not Collectible Status with the IRS?
- Facing Financial Hardship: Individuals whose necessary living expenses exceed their income.
- No Significant Assets: Taxpayers with no quickly available assets or substantial property that could be sold to cover the tax debt.
- In Tax Compliance: You must have all required tax returns filed.
How do I apply for Currently Not Collectible Status with the IRS?
-
Complete Financial Disclosure: Fill out IRS Form 433-F or Form 433-A to prove your financial hardship.
- Submit Proof of Hardship: Include supporting documents like bank statements, pay stubs, and proof of living expenses.
- Contact the IRS: Call the IRS or work with a tax professional like Pink Harbor, CPA to request CNC status.
Tips to Make Your Currently Not Collectible Status Get Approved by the IRS
- Be Thorough in Your Financials: Provide complete and accurate financial information to avoid delays or rejections.
- Stay Tax Compliant: Don’t file your taxes late.
- Ask for Help: Get a tax expert if you need help.
How do I qualify for Currently Not Collectible Status with the IRS?
Your living expenses must exceed your income. But, there are some important caveats to this:
- The IRS has maximum living expense thresholds that you must be under. This means that is you have a $1,200 a month auto expense, but the IRS only also an auto expense for $400 in your geographic area, then you will only get credit for $400
- You can’t have substantial assets that you could liquidate or borrow against to pay the IRS. If you have a house that you can borrow against, the IRS will want you to do that.
How long does Currently Not Collectible status last?
Once placed into Currently Not Collectable status, the IRS is technically supposed to reevaluate you every 12 months. The IRS could request that you complete a financial disclosure every year. Or the IRS could examine the most recent tax return that you filed and look for any substantial changes they believe would knock you out of CNC. The IRS could also ignore evaluating your eligibility for CNC status and leave you in it.
What is the biggest benefit to being in currently not collectible status?
Beyond not having to pay the IRS and the IRS not being able to collect the tax liability from you, there is a hidden benefit that is often overlooked. The Collection Statutory Expiration (CSED) does not change. The IRS typically has 10 years from when your tax return was due or filed (whichever is later) to collect on the tax owed. For example, if you filed your 2023 tax return on March 15, 2024, that return is due April 15, 2024. The IRS would have until April 15, 2034 to collect the tax. If you are placed in Currently Not Collectable status for five of these years, the IRS can still only collect the debt until April 15, 2034.
How do I get Currently Not Collectible Status with the IRS?
To get Current Not Collectable Status with the IRS, you should complete a Collection Information Statement using IRS Form 433-F. You should also assemble supporting documentation supporting the disclosures you made on the form, such as bank statements and mortgage statements. You can then contact the IRS to request this status or hire a competent professional like Pink Harbor, CPA to assist you.
I don’t qualify for CNC Currently Not Collectable status with the IRS. What else can I do?
There are many alternatives other than paying the IRS all at once, or ever. They include an Offer-in-Compromise,Installment Plans, Innocent Spouse Relief, Injured Spouse Relief, Penalty and Interest Abatement, and Currently Not Collectible Status (CNC).Pink Harbor CPA is poised to properly assist you with evaluating which option is best for you.
