Taxpayers who have no ability to make monthly payments towards their tax debt can request that the IRS place their account in currently not collectible (CNC) status.
While a taxpayer’s account is placed as currently not collectible, the IRS will not levy or attempt to collect the debt. Taxpayers who are are temporarily out of work are good candidates for currently not collectible.
In order to be considered for CNC status, the taxpayer must have filed all tax returns that are due and must be current on estimated tax payments for the current period.
The IRS will determine whether a taxpayer qualifies for CNC by completing a financial analysis. You’ll be required to report your assets, income, and expenses on Form 433-A or 433-F.
- 1 What happens to your debt when you are currently not collectible?
- 2 Will the IRS file a lien?
- 3 How does the IRS determine whether you qualify for currently not collectible?
- 4 How long do you remain in currently not collectible status?
What happens to your debt when you are currently not collectible?
It is important to understand that CNC does not wipe out your tax debt. It merely stops the IRS’ efforts to collect it while you are in CNC status.
Also, penalties and interest continue to accrue while you remain in CNC status.
The 10 year statute of limitations for the IRS to collect the debt continues to run.
Will the IRS file a lien?
CNC does not prevent the IRS from filing a lien. If the balance is above $10,000 the IRS may file a lien.
However, the IRS may not levy assets and must release any active levies.
Will you still get your tax refunds?
Any tax refunds you are owed while you are in currently not collectible status will be applied to your tax debt.
How does the IRS determine whether you qualify for currently not collectible?
The IRS will complete a financial analysis based on information you provide on Form 433 or Form 433-a. Sometimes, the information will be provided over the phone to the IRS representative.
On the financial analysis, the IRS will consider your monthly income from all sources, and they will allow you a combination of standard and actual expenses based on your location and household size.
The IRS may request documentation to verify your income and expenses.
At the end of the analysis, the IRS will determine whether you have the ability to pay.
How long do you remain in currently not collectible status?
The IRS will periodically review taxpayers placed in currently not collectible to determine if their financial situation has changed and if they’re able to now make monthly payments.
As long as your financial situation remains the same, you can remain in currently not collectible status.