Currently not collectible status: how to qualify
What Is Currently Not Collectible (CNC) Status?
Currently Not Collectible (CNC) status is a temporary relief status granted by the IRS when a taxpayer demonstrates that paying their tax debt would cause financial hardship, preventing them from meeting basic living expenses. This status allows the IRS to pause collection efforts until your financial situation improves enough to resume payments without undue burden.
How to Qualify for CNC Status
To qualify for Currently Not Collectible status, you must prove to the IRS that your allowable monthly expenses equal or exceed your monthly income. The IRS will analyze your financial situation using specific forms and criteria to determine if you meet the standards for economic hardship. This involves a thorough review of your income sources and necessary living costs to ensure you cannot pay the debt while covering essentials.
IRS Criteria and Financial Analysis
The IRS uses Form 433-A (for individuals) or Form 433-B (for businesses) to collect detailed financial information. They will compare your total monthly income to your allowable monthly expenses based on national and local expense standards. These standards provide guidelines for reasonable costs in categories like housing, utilities, transportation, and food, adjusted for your location and household size.
Required Financial Documentation
You must provide documentation for all income sources and expenses, including:
- Pay stubs and bank statements
- Mortgage or rent payments
- Utility bills
- Necessary medical expenses
- Costs for transportation and food
These documents help the IRS verify your reported figures and ensure they align with allowable standards.
How to Request Currently Not Collectible Status
You typically request CNC status by submitting the required financial forms to the IRS, either in response to a collection notice or through a formal collection process. It is often advisable to seek professional tax help when applying, as they can assist with completing forms accurately and gathering the right documentation to strengthen your case.
What Happens After CNC Status Is Granted?
If the IRS grants CNC status, they will temporarily suspend active collection activities like wage garnishments or bank levies. However, your tax debt continues to accrue penalties and interest, and the IRS will review your financial situation periodically to check for changes that might allow collections to resume.
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