Currently Not Collectible (CNC) Status
Currently Not Collectible (CNC) status pauses all IRS collection activity when paying the tax debt would prevent you from meeting basic living expenses. It is not forgiveness, but for many taxpayers it is the breathing room needed to recover financially.
CNC status, also called Status 53, places your account in temporary hardship. Wage garnishments stop, bank levies stop, and the IRS will not actively pursue payment. The 10-year collection statute continues to run, which means a portion of the debt can expire while you are in CNC status.
How the IRS Determines Hardship
The IRS evaluates CNC requests using the same Collection Financial Standards used for installment agreements and offers. If your allowable necessary expenses meet or exceed your monthly income, the IRS will generally classify the account as CNC.
Allowable expenses include national standards for food, clothing, and miscellaneous; local standards for housing and utilities; transportation expenses up to ownership and operating caps; out-of-pocket healthcare; required taxes; court-ordered payments; and certain other necessary expenses such as childcare for working parents.
What CNC Does and Does Not Do
CNC stops active collection: no garnishments, no levies, no Revenue Officer visits. The IRS may still file a Notice of Federal Tax Lien to protect the government's interest, and refunds owed to you will be applied to the back tax balance.
Interest and penalties continue to accrue while in CNC. The IRS reviews CNC status periodically, typically every two years, by looking at income reported on your subsequent tax returns. If your income rises above the hardship threshold, the IRS can remove CNC status and resume collection.
Combining CNC With Other Strategies
CNC is often the right move while a long-term solution is structured. We frequently use CNC to stop active collection while preparing an Offer in Compromise, requesting penalty abatement, or waiting for the collection statute to expire on older tax years.
For taxpayers nearing retirement or with stable but low income, CNC can be a permanent solution by itself. If the statute expires while in CNC, the debt is written off in full.
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Valley Tax Law represents clients throughout the Central Valley and Central Coast. Schedule a consultation at any of our offices, or by phone.
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