Overview

Currently Not Collectible (CNC) status is an administrative tool the IRS uses to pause active collection attempts when a taxpayer has no realistic ability to pay their tax debt at the present time. CNC gives breathing room — it halts levies and most enforced collection actions — but it is not debt forgiveness. Interest and penalties typically continue to accrue, and existing liens may remain in place (IRS: Understanding Collections).

In my practice as a CPA, I’ve used CNC to create short-term stability for clients while they reorganize cash flow, pursue unemployment benefits, or prepare stronger long-term solutions like an Offer in Compromise or an installment agreement.

(Authoritative source: IRS, “Understanding Collections” — https://www.irs.gov/businesses/small-businesses-self-employed/understanding-collections)

How the IRS evaluates a CNC request

The IRS determines CNC status by reviewing your current financial condition. This usually includes:

  • Documented monthly income (paystubs, profit/loss for self-employed taxpayers).
  • Regular and essential living expenses (housing, utilities, food, insurance, medical costs).
  • Recurring debts and secured obligations.
  • Asset values and access to credit or cash reserves.

The IRS may ask you to complete a Collection Information Statement — commonly Form 433-F for a general financial snapshot or Form 433-A/B in more detailed situations — to document the figures used in its analysis (IRS forms and instructions). The agency uses that information to calculate “disposable income” and determine whether you can make at least a partial monthly payment.

If the IRS finds no reasonable ability to pay now, it may mark your account CNC and suspend most collection actions. The agency typically informs you in writing if it places your account in CNC.

(See IRS Form 433-F information: https://www.irs.gov/forms-pubs/about-form-433-f)

What CNC pauses — and what it doesn’t

What CNC generally pauses:

  • Bank account levies, wage garnishments and property seizures for the time the account is in CNC.
  • Aggressive collection calls or field seizure actions while the IRS recognizes financial hardship.

What CNC does not stop or change automatically:

  • Interest and penalties: These generally continue accruing on the unpaid balance (IRS collections guidance).
  • Notices and correspondence: The IRS may still send letters to review your situation or request updated information.
  • Tax liens: A Notice of Federal Tax Lien may already be filed or could be filed despite CNC; CNC does not automatically remove an existing lien. To learn more about liens and removal options, see our guide on how tax liens affect credit and withdrawal steps (How Tax Liens Affect Credit and Steps to Request a Withdrawal — https://finhelp.io/glossary/how-tax-liens-affect-credit-and-steps-to-request-a-withdrawal/).
  • Refund offsets: The IRS can still offset future federal tax refunds to apply them against outstanding liabilities unless a specific promise not to offset exists.
  • Statute of limitations: The 10-year collection statute of limitations generally continues to run from the date of assessment; CNC usually does not extend the IRS’s time to collect.

Because CNC is typically a temporary classification, the IRS will periodically review your financial picture and may return the account to active collection if your circumstances improve.

(IRS collections overview: https://www.irs.gov/businesses/small-businesses-self-employed/understanding-collections)

How to request CNC and what to expect

  1. Contact the IRS — Call the number on the notice or use the IRS automated system, or work through a tax professional. Many CNC cases begin when a taxpayer responds to a collection notice with a request for consideration.
  2. Provide financial documentation — Be prepared to provide pay stubs, bank statements, monthly bills, and, when applicable, profit-and-loss reports for self-employed taxpayers.
  3. Complete collection forms if requested — The IRS commonly uses Form 433-F as a summary and Form 433-A/B for more detailed worksheets.
  4. Wait for the decision — The IRS will review and usually issues a written determination placing the account in CNC or explaining why it denied the request.

Tips from my practice:

  • Be thorough and honest. Incomplete or inconsistent documentation is the most common reason CNC is denied.
  • Keep copies of everything. If your financial situation worsens, updated records support a new request or appeal.

(Forms and documentation: IRS Form 433-F and related instructions — https://www.irs.gov/forms-pubs/about-form-433-f)

Real-world examples (illustrative)

  • Example 1: A single-earner household lost employment and had monthly expenses that exceeded unemployment benefits plus savings. After submitting monthly bills and bank statements, the family’s IRS account was moved to CNC for 18 months while they searched for steady work.

  • Example 2: A self-employed contractor reported a 60% revenue drop and high medical bills. The IRS placed the file in CNC while the contractor restructured business operations and later negotiated a partial-payment installment agreement.

These examples reflect typical outcomes, but results vary by case. In my experience, CNC most often buys time and reduces stress — it rarely solves a long-term collection issue alone.

Alternatives and next steps to resolve the debt

CNC is a temporary relief step, not always the final solution. Common next options include:

  • Installment Agreement: If you can make a monthly payment, the IRS offers several installment agreement types, including streamlined and partial-payment options. See our Installment Agreement guide for eligibility and application steps (Installment Agreements Explained: Types, Fees, and Eligibility — https://finhelp.io/glossary/installment-agreements-explained-types-fees-and-eligibility/).
  • Offer in Compromise (OIC): If you can demonstrate that paying the full amount would cause economic hardship, an OIC may allow you to settle for less than the full balance. CNC documentation often overlaps with an OIC financial package, but the OIC process has stricter standards (see When to Consider an Offer in Compromise vs Bankruptcy — https://finhelp.io/glossary/when-to-consider-an-offer-in-compromise-vs-bankruptcy-for-tax-debt/).
  • Bankruptcy or legal remedies: In limited situations, bankruptcy may discharge certain tax debts; consult a bankruptcy attorney.

Choosing between these depends on how quickly your finances can improve, whether you can make consistent payments, and whether liens or collateral complicate the situation.

Common mistakes and misconceptions

  • Mistake: Believing CNC erases the debt. It does not — it pauses collection efforts but interest and penalties usually continue.
  • Mistake: Failing to update the IRS. If your income rises and you do not report it, the IRS can revoke CNC and resume collection.
  • Misconception: No correspondence = no risk. The IRS may still communicate to request updates; ignoring letters can lead to levies if your finances change.

Brief FAQ

How long can I stay in CNC?
CNC can remain as long as your financial condition shows inability to pay, but the IRS will periodically review your status. The account could return to active collection if your financial picture improves. (IRS collections guidance)

Will the IRS file a lien while I’m in CNC?
Yes. A lien can be filed before, during, or after a CNC determination. CNC does not automatically remove an existing Notice of Federal Tax Lien; you must pursue lien withdrawal, subordination, or release through specific processes. See our tax lien guide for more detail (How Tax Liens Affect Credit and Steps to Request a Withdrawal — https://finhelp.io/glossary/how-tax-liens-affect-credit-and-steps-to-request-a-withdrawal/).

Does CNC stop refund offsets or passport issues?
CNC does not automatically prevent the IRS from offsetting federal refunds. For serious delinquency, the IRS may also certify debts to the State Department for passport actions; CNC status alone may not prevent certification.

Practical checklist if you’re considering CNC

  • Gather pay stubs, bank statements (90 days), recent bills, proof of unemployment or medical expenses.
  • Fill out the requested Collection Information Statement (Form 433-F or others asked by the IRS).
  • Consider professional representation if you have complex assets, business income, or existing liens.
  • Monitor IRS correspondence and respond promptly to avoid automatic actions.

Professional disclaimer

This article is educational and based on general IRS rules and my professional experience as a CPA. It is not individualized tax advice. For guidance tailored to your situation, consult a licensed tax professional or an IRS-authorized practitioner.

Authoritative sources

Internal resources:

If you want help preparing the financial package for a CNC review or evaluating alternatives, consider contacting a licensed tax professional or Low Income Taxpayer Clinic (LITC) in your area.