Quick overview
If you cannot pay your federal tax debt without going into financial hardship, the IRS may place your account in Currently Not Collectible (CNC) status. CNC stops most active collection actions — typically levies, wage garnishments, and automated atlas collections — while the IRS classifies the account as uncollectible based on your verified finances. CNC is a temporary relief measure, not debt forgiveness, and interest and penalties keep accruing (IRS, Topic No. 204).
How CNC works in practice
- The IRS reviews your financial information (income, household expenses, assets) and decides if you have truly no reasonable ability to pay. The usual form the IRS asks for in collection cases is Form 433-F, Collection Information Statement, though local examiners may request supplemental documents (bank statements, pay stubs). See IRS guidance on inability to pay (IRS, Topic No. 204).
- If the IRS determines that your verified necessary living expenses meet or exceed your monthly income, they may place your account in CNC status. When that happens, most enforcement actions are suspended. The IRS can still file or keep a Notice of Federal Tax Lien to protect the government’s interest.
- CNC does not remove the underlying liability. Interest and penalties continue to accrue, and the IRS’s 10-year collection statute of limitations continues to run from the date of assessment.
In my practice working with taxpayers in severe cash-short situations, CNC provides immediate breathing room to stop levies and focus on rebuilding—but it isn’t a permanent fix. Treat it as a temporary pause to stabilize your finances and plan the next move.
Who typically qualifies for CNC?
The IRS will consider CNC when a taxpayer can show that paying taxes would prevent them from meeting necessary living expenses. Common qualifying situations include:
- Recent job loss or long-term unemployment.
- Medical bills or disability that drain household resources.
- Business income that has fallen sharply and will not recover in the near term.
- Fixed-income seniors whose essential expenses consume all available income.
Eligibility depends on the exact numbers and documentation. Merely claiming hardship without documentation is unlikely to produce CNC status.
How to request CNC — step-by-step
- Gather documentation
- Recent pay stubs, unemployment statements, or profit-and-loss statements for business owners.
- Bank statements (90 days where possible).
- Proof of monthly expenses: rent/mortgage, utilities, food, child care, insurance, medical costs, transportation. Include court-ordered payments and reasonable extraordinary expenses.
- Complete the Collection Information Statement
- Use Form 433-F in most collection settings. For complex cases the IRS may request a 433-A (individuals) or 433-B (businesses), but 433-F is the standard modern form for collection information. Include attachments that substantiate unusually large expenses.
- Contact the IRS collection officer
- If you have a notice or a collection officer assigned, send the completed collection statement and supporting documents to that officer. If you don’t have an assigned officer, call the phone number on your most recent IRS notice and ask to discuss collection alternatives.
- Request CNC in writing and follow up
- Confirm the request in writing and keep copies of everything you send. Ask the IRS for the specific reason code or notation when they place your account in CNC, and request a written confirmation of the CNC status and any review date.
- Keep communicating
- If your financial situation improves, notify the IRS promptly. If your condition worsens, be ready to supply updated documents for continued CNC consideration.
What CNC does — and doesn’t — do
What CNC typically stops
- Most active levy and garnishment actions (IRS generally suspends levies while an account is CNC). However, the IRS can still secure its interest with a Notice of Federal Tax Lien.
- Collection phone calls and automated enforcement tied to immediate collection.
What CNC does not do
- Eliminate the tax liability; the debt remains due and collectible.
- Stop interest and penalties from accruing on the unpaid balance (interest continues to compound under IRS rules).
- Stop the statute of limitations clock on collection (typically 10 years from assessment).
- Guarantee a permanent halt to collections; the IRS periodically reviews CNC accounts and may re-evaluate eligibility.
Note on liens and credit: While the three major credit bureaus no longer include tax liens on consumer credit reports (a change that began in 2018), a Notice of Federal Tax Lien is a public record and can still affect your ability to borrow or sell property.
Alternatives and next steps to consider while in CNC
CNC buys time. Use it to pursue a longer-term resolution, such as:
- Installment Agreement: If you gain some ability to make monthly payments, a guaranteed or streamlined installment agreement can provide a consistent payment plan.
- Offer in Compromise (OIC): If you have doubt as to collectibility and can’t realistically pay the full amount, an OIC may settle your debt for less than owed. See our guide on what an Offer in Compromise Is and How It Works and the Offer in Compromise process. To prepare an OIC you’ll need a financial package — our article on how to build a financial package for an Offer in Compromise explains what to include.
- Circumstances that may merit bankruptcy advice: Under certain conditions, bankruptcy may discharge older income tax debt, but that path has strict rules and long-term consequences. Consult a bankruptcy attorney and a tax professional before assuming it will provide relief.
In my experience, many clients pursue CNC while preparing an OIC or getting their household budget stable enough to accept a manageable installment agreement.
Documentation checklist (practical)
- 3 months of bank statements
- 3–6 months of pay stubs or income summaries
- 12 months profit-and-loss or business bank statements if self-employed
- Copies of monthly bills (rent/mortgage, utilities, insurance, medical)
- Proof of unemployment, disability payments, or social security income
- Driver’s license and Social Security number for ID verification
Keep originals and send copies; always note dates and method of delivery when you submit documents to the IRS.
Common mistakes to avoid
- Missing documentation or submitting incomplete expense support. The IRS disqualifies many CNC requests for lack of proof.
- Treating CNC as debt forgiveness. Clients who relax and ignore the account may see liens remain or interest compound, reducing long-term options.
- Waiting to tell the IRS about income changes. If your income rises and you don’t report it, the IRS may remove CNC status and pursue collection or levy when you’re no longer eligible.
Frequently asked questions
Q: How long does CNC last?
A: CNC is not a fixed-term program. The IRS periodically reviews accounts and may reassess annually or when new information is available. It can be removed earlier if the taxpayer’s financial situation improves.
Q: Will the IRS stop interest and penalties while I’m CNC?
A: No. Interest and penalties continue to accrue on the unpaid tax balance (IRS rules). CNC pauses active enforced collection but does not freeze accruals.
Q: Will I still get tax refunds?
A: Federal refunds are generally applied (offset) against outstanding tax balances even if the account is CNC. The IRS will typically offset refunds to satisfy outstanding liabilities.
Q: Does CNC affect my credit score?
A: CNC itself is an IRS administrative status and does not appear on credit reports. However, if the IRS files a Notice of Federal Tax Lien (which they may do to protect their interest), that public filing can affect credit and lending decisions.
Professional tips from my practice
- Be proactive: Provide a clear, well-documented financial statement up front. Missing documents slow everything down.
- Use CNC strategically: If you truly have no disposable income, accept CNC as temporary breathing room and prepare a plan (budgeting, savings, or a path to an Offer in Compromise).
- Keep records of every interaction with the IRS: names, dates, phone numbers, and confirmation letters.
Where to get authoritative guidance
- IRS Topic No. 204, Tax Information for People Who Are Unable to Pay Taxes: https://www.irs.gov/taxtopics/tc204
- IRS: Understanding Your IRS Notices and Bills (collection procedures): https://www.irs.gov/individuals/understanding-your-tax-bill
- IRS publications on liens and levies: https://www.irs.gov/businesses/small-businesses-self-employed/levies-and-seizures
Disclaimer
This article is educational and reflects common IRS procedures and my professional observations. It is not individualized tax advice. For specific guidance about your tax account, contact a qualified tax professional, enrolled agent, CPA, or the IRS directly.
Author: Senior Financial Content Editor, FinHelp.io
