Qualifying for Currently Not Collectible (CNC)
To stop IRS collection actions and postpone tax debt payment, consider Currently Not Collectible.
Currently Not Collectible (CNC) is a status that the IRS assigns to tax debt cases that the agency believes it can’t reasonably collect on. If paying anything toward your tax debt would throw you into financial crisis, the IRS is likely to assign you Currently Not Collectible status.
Fact: CNC status is also known in the IRS as “Status 53” – named for Form 53 that must be completed to file for CNC
Generally, those whose financial condition only allows them to meet basic living needs are eligible for CNC status. CNC means that the IRS will stop all attempts to collect on the debt until your financial situation improves. No more angry letters, no bank levies, no wage garnishments.
Who qualifies for Currently Not Collectible status?
The IRS puts tax debt cases in Currently Not Collectible for a few reasons:
- If they are not able to find the debtor, they will postpone payment until they are able to make contact with the taxpayer.
- Additionally, if the debtor is enduring a poor financial situation and the IRS cannot hope to get any amount of back taxes, they put the case under CNC and wait for the financial condition of the taxpayer to improve.
The IRS regularly reviews CNC cases. If they find that your financial situation improves they will resume the collection process. However, legally, the IRS has only 10 years to collect the tax debt.
True or false: If you have an extended period of financial hardship, it’s possible you’d never pay anything on your IRS tax debt.
If you qualify for CNC status until the 10-year statute of limitations runs out, then you would pay nothing at all toward your tax debt.
The IRS charges monthly penalties and interest on all unpaid tax debt. CNC does not stop the IRS from charging penalties and interest. So, keep in mind that although you won’t have to make payments, your tax debt increases monthly. Should your financial situation ever improve, you will be held responsible for a larger amount of tax debt.
How to achieve CNC status
To have your tax debt cased assigned CNC status, you will have to submit to a full financial review. The IRS will investigate your financial situation to determine that you really can’t pay anything toward your back taxes.
Generally speaking, the IRS will only assign CNC status if you are current in filing your returns. This means that if you have unfiled returns, you must file them in order to be considered for CNC status.
Professional assistance is helpful when pursuing CNC status. A licensed tax professional will help you understand whether or not you qualify for CNC. They’ll help you file any unfiled tax returns and will make sure your paperwork truly reflects your inability to pay anything toward your tax debt. Remember, CNC is meant to be a temporary status. If you are assigned CNC status, the IRS will regularly review your case to make sure it is still appropriate.