How to Qualify for and Navigate “Currently Not Collectible” Status With the IRS

Facing tax debt can be overwhelming, especially when paying it would cause severe financial hardship. One solution is “currently not collectible”’” (CNC) status, which pauses IRS collection efforts temporarily. While CNC status doesn’t erase your debt, it can provide breathing room to regain financial stability.

This guide explains the pros and cons, eligibility requirements, and steps to apply, so you can make an informed decision about whether CNC status is right for you.

What is IRS “currently not collectible” status?

CNC status is an agreement with the IRS that pauses its efforts to collect your tax debt. If paying your debt would prevent you from meeting basic living expenses, CNC status may provide temporary relief.

Here’s what you need to know:

• Debt is not erased: CNC status delays collection but doesn’t eliminate your debt.
• Accruing costs: Interest and penalties continue to grow on the unpaid balance.
• Annual reviews: The IRS reevaluates your financial situation yearly to determine whether you can resume payments.

While CNC status can provide breathing room, it’s not permanent. If your financial situation improves, the IRS may revoke your CNC status and require repayment.

Who qualifies for CNC status?

To qualify, you must prove that paying your tax debt would cause financial hardship. The IRS considers the following:

Here are several examples:

If you’re…	Eligible for CNC?
Relying solely on unemployment or Social Security income	✅
Facing medical bills, job loss, or other unexpected hardships	✅
Experiencing divorce, death of a spouse, a natural disaster, or other life changes	✅

How to request CNC status with the IRS

You can request CNC status by calling the IRS directly or seeking help from a tax professional.

Here are the steps to apply:

1. Contact the IRS: Call the number on your tax notice or dial 800-829-1040.
2. Provide documentation: Be prepared to submit recent tax returns, Form Form 433-A (or 433-F/B, depending on your situation), and proof of income, expenses, and assets (e.g., pay stubs, bills, and bank statements)
3. Cooperate with the review: The IRS may compare your income and expenses to its standards for allowable living expenses.

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Tip

Have your supporting documents ready to expedite the process and improve your chances of approval.

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If you have income, the IRS will determine whether you have enough income to start paying small amounts toward your tax debt. It might make an Offer in Compromise, which will reduce your debt.

CNC status is reserved for those taxpayers who truly have no assets and minimal income, and collecting the debt will cause harm to the taxpayer. One mistake I’ve seen those in this situation make is not talking to the IRS frankly about their financial situations.

David Haas, CFP®

What happens after you’re granted CNC status?

Once you’re approved, the IRS will stop collection actions, including levies on your assets. However, your account will continue to accrue interest and penalties.

Important considerations include:

• Annual reviews: The IRS will reassess your financial situation each year.
• Refund offsets: Any tax refunds you’re owed will be applied to your debt.
• Statute of limitations: The IRS typically has 10 years to collect your debt, but certain actions can pause this timeline.

Statue of limitations for CNC status

The IRS has a 10-year window to collect unpaid taxes. However, the timeline can be extended if you:

• Request an Offer in Compromise.
• Enter bankruptcy or request an installment plan.
• Move abroad or serve in a military combat zone.

Risks and drawbacks of IRS uncollectible status

While CNC status provides relief, it comes with potential downsides:

Drawback	What to know
Penalties and interest	Interest and failure-to-pay penalties continue to accrue, increasing the overall debt.
Tax liens	The IRS may file a Notice of Federal Tax Lien, which can damage your credit score.
Potential repayment	If your finances improve, you may need to repay the debt, including accrued interest and penalties.
Refund offsets	The IRS can withhold future tax refunds and apply them to your balance.

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Talk to the IRS as soon as you realize you’re unable to pay the full amount of your tax debt. A CPA or other tax professional can help you in your interactions with the IRS and explain your options to you. The biggest mistake is ignoring the situation.

David Haas, CFP®

Alternatives to CNC status

If CNC status isn’t right for you, consider these options:

Offer in Compromise (OIC)

Settle your debt for less than you owe. Requires a $205 application fee, but low-income taxpayers may qualify for a waiver.

Payment plan

Pay your debt in smaller monthly installments. Setup fees range from $31 to $205, but fee waivers are available for qualifying low-income taxpayers.

Tax relief company

Work with professionals to navigate IRS programs and negotiate on your behalf. (Check out our list of the best tax relief providers.)

Read More

What Is Tax Relief?

FAQ

Can CNC status be revoked?

Yes. If your finances improve, the IRS will require you to resume payments.

Does CNC status affect my credit?

Only if the IRS files a tax lien, which can lower your credit score.

Can state taxes be made CNC?

CNC applies to federal taxes. State laws vary, so check with your state’s tax agency.