There are many ways to resolve a tax liability. You can set up a payment plan, attempt to settle a tax debt with an offer in compromise, or pay the balance that you owe in full. However, there are some instances where any amount of money would create an unfair economic hardship on the taxpayer. As a result, the IRS created a temporary hardship status known as IRS currently non-collectible status. This may be also referred to by the IRS or by tax practitioners as “CNC status” or 53ing an account (the code the IRS enters into the account to place it in it IRS currently non-collectible status. By placing an account in IRS currently non-collectible status, the IRS essentially halts all attempts at collection activity on an account until it feels that the taxpayer is ready to make payments again. IRS currently non-collectible status generally lasts anywhere from six months to over two years.
In order for the IRS to deem that a taxpayer account is non-collectible, the taxpayer must demonstrate a severe and apparent economic hardship. The IRS will collect detailed financial information from the taxpayer, which is usually collected in the form of a financial statement (433-F or 433-A). After analyzing the current financial information, including supporting documentation such as bank statements and verification of monthly expenses, the IRS will make a determination on the collectability of the account. If the account is deemed non-collectible, the IRS will remove it from its queue of active collection accounts. If the account is deemed collectible, then the IRS will request payment terms based on its analysis of the taxpayer’s financial situation.
One of the major advantages of IRS currently non-collectible status is that the ten-year statute of limitations on collections, known as the CESD, continues to run on the account while the account has been deemed non-collectible. This means that the IRS has less time to try and collect on the taxpayer when they are finally deemed collectible. This should be a major consideration for those who can barely afford to make small payments to the IRS every month. You may not be required to make any payments to the IRS until your financial hardship dissipates and you are that much closer to discharging the liability in full. However, one key disadvantage of IRS currently non-collectible status is that it is only a temporary solution. Generally lasting not more than two years, the taxpayer will be forced to reapply for IRS currently non-collectible status after they are deemed collectible again or set up an alternate payment arrangement with the IRS. Moreover, you can suddenly be tossed out of IRS non-collectible status with no warning and then will have to scramble for a resolution. Your financial status may not have changed since you were deemed non-collectible, but you will still need to resubmit financial information to get back to being considered non-collectible.
In conclusion, IRS currently non-collectible status is not for everyone. However, if you do qualify, it can provide much needed temporary relief for your IRS collection issues. In order to find out if you qualify for non-collectible status, fill out a financial statement with an accurate picture of your monthly income and expenses. In the alternative, you are welcome to contact me using the contact information on this site and I can help screen you to determine if IRS currently non-collectible status is right for you.
 See IRM 5.16.11 for a full explanation of IRS Currently Non-Collectible Policy and Procedure, found here: https://www.irs.gov/irm/part5/irm_05-016-001r.html
Our best stuff: secrets, tax saving tools, and tax defense strategies from the braintrust at Brotman Law.
These ten big ideas will change the way you think about your taxes and your business.
Find the articles and videos you need to make the right tax decisions in the learning center.
It is not just about what we do, but who we are, why we do it, and how that benefits you.
Meet with us to outline your strategy. No further obligation, 100% money-back guarantee.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, I must inform you that any U.S. federal tax advice contained in this website is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter contained in this website.