Tax Resolution · IRS Hardship Relief
Currently Not Collectible (CNC) Status
If you cannot afford to pay your federal tax debt without sacrificing essential living expenses, the IRS may consider placing your account in Currently Not Collectible status. Learn how this hardship determination works, what financial information may be required, and which tax-resolution options may fit your circumstances.
What Is Currently Not Collectible Status?
Currently Not Collectible (CNC) is a status the Internal Revenue Service (IRS) may grant when it determines that a taxpayer cannot pay an outstanding federal tax liability without experiencing financial hardship. When an account is placed in CNC status, the IRS generally delays active collection while the taxpayer's financial circumstances remain insufficient to support payment.
CNC status is a temporary collection measure, not tax forgiveness. The outstanding balance generally remains due, and interest and applicable penalties generally continue to accrue. The IRS may also review the account again if the taxpayer's financial situation changes.
For Arizona taxpayers facing unpaid federal taxes, CNC may be worth evaluating when income and available resources are not enough to cover necessary living expenses and a tax payment. Approval is not automatic; the IRS evaluates the individual facts and financial information.
For federal guidance, see the IRS page on Currently Not Collectible status.
CNC Status Delays Collection—It Does Not Erase the Debt
A CNC determination may provide important breathing room when paying the IRS is not financially realistic. However, it does not eliminate the tax liability or guarantee that every collection-related action will stop.
- The IRS generally delays active collection while the account remains in CNC status.
- Interest and applicable penalties generally continue to accrue.
- A federal tax lien may still be filed, depending on the circumstances.
- Federal tax refunds may still be applied to qualifying outstanding tax debts.
- The IRS may reconsider CNC status if financial circumstances improve.
How the IRS Evaluates Financial Hardship
The IRS considers whether a taxpayer has the financial ability to pay. The review can involve income, reasonable and necessary living expenses, assets, liabilities, and other relevant financial circumstances. There is no single income figure that guarantees CNC approval in every case.
Depending on the taxpayer's circumstances, the review may consider:
- Income: Employment earnings, self-employment income, retirement income, benefits, and other sources of funds.
- Necessary living expenses: Housing, utilities, food, transportation, medical costs, and other essential expenses relevant to the financial review.
- Assets and available funds: Bank accounts, investments, real estate, vehicles, and other property that may affect the ability to pay.
- Household obligations: Dependents and other financial responsibilities that affect the taxpayer's available income.
- Business finances: For business taxpayers, relevant income, operating expenses, assets, and other financial information.
The IRS may compare the information provided with its collection standards and other applicable requirements. Accurate, complete financial information helps the IRS evaluate the request; it does not guarantee a particular determination.
What Documents May Be Needed?
The IRS may request a Collection Information Statement and supporting records to understand a taxpayer's ability to pay. The appropriate form depends on the case and the information requested by the IRS.
Forms that may be relevant include:
- Form 433-F: Collection Information Statement.
- Form 433-A: Collection Information Statement for Wage Earners and Self-Employed Individuals.
- Form 433-B: Collection Information Statement for Businesses.
Depending on the request, the taxpayer may also need to provide:
- Recent pay statements or records of other income.
- Bank statements and information about available funds.
- Monthly household or business expense records.
- Information about assets, loans, and outstanding obligations.
- Other documents requested by the IRS to support the financial information.
Use the current forms and instructions applicable to your situation. Official forms and instructions are available through the IRS forms and publications page.
How to Request Currently Not Collectible Status
The process depends on the taxpayer's account, the type of tax debt, and the IRS's requests. These are the principal steps typically involved in evaluating a hardship-based collection delay.
1. Review the Tax Account
Identify the tax periods and balances involved, review IRS notices, and determine whether a levy or another collection action is pending. Any deadlines in an IRS notice should be considered separately.
2. Evaluate Income and Necessary Expenses
Review the taxpayer's income, living expenses, assets, and other relevant obligations to determine whether payment would create financial hardship.
3. Prepare the Financial Information
Complete the applicable financial statement and gather the records requested by the IRS. Information should be complete, accurate, and consistent with supporting documents.
4. Address the IRS Determination
Respond to IRS questions and review the determination when received. If CNC status is not granted, the reason for the decision and other possible resolution options should be evaluated.
5. Monitor Future Obligations
Continue meeting applicable filing and payment obligations. The IRS may review the account again, and an improved financial position may affect whether collection can resume.
Does CNC Stop IRS Levies and Wage Garnishments?
When the IRS grants CNC status, it generally delays active collection efforts while the account remains in that status. This can affect collection actions such as levies on wages or funds in a bank account. However, a request for CNC status does not itself establish that collection has stopped. Taxpayers should confirm the status of their account and any existing collection action.
CNC status also does not necessarily prevent the IRS from filing a Notice of Federal Tax Lien. A lien is a legal claim against property; a levy is an action to take property to satisfy a tax liability. These are different collection tools and may have different consequences.
If you have received a notice of intent to levy, a notice involving a bank account, or a wage levy, do not assume that a CNC request automatically extends any deadline or resolves the pending action.
Related Carr Law resources:
Federal IRS Debt and Arizona State Tax Debt Are Different
An IRS CNC determination concerns a federal tax account. It does not automatically place an Arizona Department of Revenue account into the same status or suspend state collection activity.
Taxpayers who owe Arizona state taxes should separately review the applicable state procedures and available payment or collection-relief options. The Arizona Department of Revenue provides information about payment arrangements for individuals.
CNC Status and Other Tax-Resolution Options
CNC status may be appropriate when a taxpayer cannot afford to pay. If the financial circumstances or tax issues are different, another option may be more suitable. The right approach depends on the facts, the applicable requirements, and the taxpayer's ability to pay.
IRS Installment Agreement
A payment plan may be appropriate when the taxpayer can make payments over time. Eligibility, payment terms, and fees depend on the plan and the taxpayer's circumstances.
Offer in Compromise
An Offer in Compromise may allow an eligible taxpayer to settle qualifying tax debt for less than the full amount owed, subject to IRS requirements and approval. Not every taxpayer qualifies.
Review of Outstanding Tax Debt
When the amount owed, filing history, or collection status raises additional issues, a broader review may be needed to determine the available options and applicable deadlines.
How Carr Law Firm Can Help
Evaluating CNC status begins with understanding the taxpayer's financial position and the current status of the tax account. Carr Law Firm provides tax-resolution legal services to taxpayers dealing with IRS and tax-related issues.
Depending on the circumstances, legal assistance may include reviewing IRS notices and outstanding tax periods, assessing the financial information relevant to a hardship request, identifying documents that may be needed, and considering whether CNC status or another resolution option is appropriate.
Attorney Nathan E. Carr, Esq., has a Master of Laws (LL.M.) in Taxation. Carr Law Firm can help evaluate the issues involved in your tax matter and explain potential next steps based on the facts and applicable law.
Frequently Asked Questions
Does Currently Not Collectible status forgive tax debt?
No. CNC status generally delays IRS collection due to financial hardship. The tax liability remains, and interest and applicable penalties generally continue to accrue.
Can the IRS still file a federal tax lien?
Yes. The IRS may file a Notice of Federal Tax Lien even when an account is in CNC status. CNC should not be assumed to prevent every collection-related action.
Will interest and penalties stop while my account is CNC?
Generally, no. Interest and applicable penalties generally continue while the tax remains unpaid, subject to any separate relief that may apply.
Can the IRS review my financial situation again?
Yes. The IRS may review the account and reconsider the collection delay if the taxpayer's financial circumstances change.
Can a business request CNC status?
A business with federal tax debt may ask the IRS to evaluate its ability to pay. The IRS may request business financial statements and supporting records. Approval depends on the facts and applicable requirements.
Does IRS CNC status apply to Arizona state tax debt?
No. Federal and Arizona state tax accounts are administered separately. State tax debt requires a separate review of the Arizona Department of Revenue's procedures and available options.
Discuss Your Tax Hardship With Carr Law Firm
If you are unable to pay your tax debt without compromising essential expenses, a review of your circumstances can help clarify which options may be available. Contact Carr Law Firm to discuss your tax-resolution matter.
Call (480) 568-6115Email:
This article is for general informational purposes only and is not legal, tax, or financial advice. It does not create an attorney-client relationship. Tax laws and administrative procedures may change, and the availability of any tax-resolution option depends on the specific facts and applicable requirements. Currently Not Collectible status is not guaranteed and does not eliminate tax debt. Consult a qualified professional about your circumstances.