Overview
Converting a Partial-Payment Installment Agreement (PPIA) to Currently Not Collectible (CNC) status gives taxpayers temporary relief from collection activity when they lack the ability to pay. In CNC status the IRS generally suspends aggressive collection actions such as levies and wage garnishments, but the underlying tax debt remains and interest and penalties usually continue to accrue (IRS Publication 594: The IRS Collection Process — https://www.irs.gov/pub/irs-pdf/p594.pdf).
In my 15+ years advising clients, I’ve seen CNC status provide breathing room for people facing job loss, medical emergencies, or sudden business downturns. However, it’s not automatic and requires proof that your essential living expenses exceed your ability to pay. This guide walks through eligibility, what to submit, likely outcomes, and strategic alternatives.
Who can qualify for CNC and when to consider it
You should consider CNC when:
- Your monthly budget leaves no realistic ability to make even reduced PPIA payments.
- You have temporarily no income (job loss) or volatile income that cannot support payments.
- Unexpected and unavoidable expenses (medical bills, disaster losses) push you below the IRS allowable living expenses.
Eligibility depends on your current financial facts. The IRS evaluates income, allowable expenses, assets, and dependents. If your allowable expenses consume your income and leave nothing to apply to taxes, you may qualify.
If you’re deciding between continued partial payments and CNC, read our comparison: Choosing Between an Installment Agreement and Currently Not Collectible Status (https://finhelp.io/glossary/choosing-between-an-installment-agreement-and-currently-not-collectible-status/).
How the IRS evaluates a CNC request
The IRS uses a Collection Information Statement (usually Form 433-F for individuals) to evaluate CNC requests. The form asks for income, monthly expenses, assets, and liabilities. For some taxpayers the IRS may request Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) or Form 433-B (for businesses), but Form 433-F is the common standardized form now used in collections (Form 433-F PDF — https://www.irs.gov/pub/irs-pdf/f433f.pdf).
The IRS compares your reported finances to national and local standards and to the IRS allowable expenses. If your allowable expenses exceed income or leave no practical payment ability, the IRS may place your account in CNC.
For more on installment payment calculations that affect whether CNC is appropriate, see: How the IRS Calculates Installment Agreement Payment Amounts (https://finhelp.io/glossary/how-the-irs-calculates-installment-agreement-payment-amounts/).
Step-by-step: How to convert a PPIA to CNC
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Confirm compliance: Make sure all required federal tax returns are filed. The IRS typically won’t grant CNC if you are not current on filings. If you have missing returns, file or get professional help quickly.
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Gather documentation: Common documents the IRS will request include
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Recent pay stubs or proof of unemployment benefits
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Bank statements (3–6 months)
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Proof of essential monthly expenses (rent/mortgage, utilities, food, insurance, medical bills)
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Childcare, eldercare, or special needs costs
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Proof of any unusual or one-time costs
Keep photocopies and a clear index of what you’re sending. In my practice, a well-organized packet speeds decisions and reduces follow-up requests.
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Complete Form 433-F (or the form the IRS requests): Be accurate and conservative. Overstating expenses or understating income can result in penalties. The IRS will verify the numbers.
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Contact the IRS collection office handling your case: Use the phone number on your IRS notice, the installment agreement, or the IRS Collections contact page. Explain your hardship and ask for a review for CNC status. If your case is assigned to a revenue officer, request a collection review.
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Send the documentation promptly: Follow the submission instructions given by the IRS representative. For assigned cases, send documents to the contact address or fax number on your notice. Retain delivery confirmation or call notes.
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Follow up and keep records: Note the date, name of the IRS agent, and the content of each call. If the IRS places payments on hold while reviewing, get that in writing if possible.
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Await decision and prepare for periodic reviews: The IRS may approve CNC temporarily and later re-evaluate your solvency. If your circumstances improve, the IRS can reinstate collection actions or require you to resume payments.
What CNC status does — and doesn’t — do
What it typically does:
- Stops enforced collection actions such as levies and wage garnishments while CNC is in effect (IRS Publication 594 — https://www.irs.gov/pub/irs-pdf/p594.pdf).
- Provides time to recover from hardship without payments that would compromise living essentials.
What CNC does not do:
- It does not erase the tax debt — the liability stays on your account, and interest and penalties generally continue to accrue.
- It does not always remove existing federal tax liens. Liens generally remain unless you meet specific lien release criteria.
- It does not prevent future IRS contact — you’ll still receive notices and must respond.
Important: CNC status is a collection suspension, not a tax forgiveness program. If you later have the ability to pay, collection may resume.
How long does CNC last and what triggers review?
CNC can remain as long as you continue to lack ability to pay. The IRS periodically reviews CNC accounts — timelines vary — and will reevaluate if they learn of increased income, changes in assets, or aging-off of large expenses. If your situation improves, the IRS may cancel CNC and require you to resume payments or offer a new installment plan.
Interaction with liens and statute of limitations
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Liens: A federal tax lien protects the government’s interest in your property. CNC status does not automatically remove a lien; lien lapses or releases follow separate IRS rules. If you need a lien released for legitimate hardship, the IRS has procedures (see IRS lien policies, Publication 594 and internal procedures).
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Statute of limitations: The IRS generally has 10 years from assessment to collect a tax debt (Collection Statute Expiration Date). Placing an account in CNC does not pause or extend that period in most cases; however, certain events (installment agreements, offers in compromise, bankruptcy) can affect timing. For specific timing questions consult a tax professional (see Taxpayer Advocate Service — https://www.taxpayeradvocate.irs.gov/).
Common mistakes and how to avoid them
- Waiting too long: Don’t let collections progress until levies happen. Contact the IRS early and request a hardship review as soon as your budget collapses.
- Missing or incomplete documentation: Provide clear, organized evidence. Missing items lengthen review time and reduce approval odds.
- Hiding assets or misreporting income: This can lead to penalties and renewed collection. Be transparent.
- Assuming CNC stops interest & penalties: It usually doesn’t. Understand the ongoing balance behavior.
Alternatives and next steps
- Offer in Compromise (OIC): If your total ability to pay — present and future — is limited but you have some lump-sum capacity, an OIC may permanently settle the debt. OIC is not automatic and has its own strict criteria.
- Modified installment agreement: If you can pay something reasonable later, renegotiate your payment schedule.
- Bankruptcy: In some cases discharge may be possible, but tax debts have unique rules and timing; consult a bankruptcy tax attorney.
Compare these options in: Partial-Payment Installment Agreements: What to Expect (https://finhelp.io/glossary/partial-payment-installment-agreements-what-to-expect/) and Choosing Between an Installment Agreement and Currently Not Collectible Status (https://finhelp.io/glossary/choosing-between-an-installment-agreement-and-currently-not-collectible-status/).
Practical tips from my practice
- Build a simple two-column budget: honest income vs. essential expenses. The IRS wants to see that essentials consume available resources.
- Keep communications professional and documented. If you hire a representative (CPA, EA, or tax attorney), file Form 2848 (Power of Attorney) to allow them to speak for you.
- If a revenue officer is assigned, treat the interaction as a negotiation: be prepared, respectful, and factual.
Final checklist before you apply
- All tax returns filed and up to date
- Recent pay stubs and bank statements gathered
- A completed Form 433-F (or requested form)
- Notices and installment agreement paperwork available
- Contact information for IRS collection office on hand
Sources and further reading
- IRS Publication 594: The IRS Collection Process — https://www.irs.gov/pub/irs-pdf/p594.pdf
- Form 433-F, Collection Information Statement — https://www.irs.gov/pub/irs-pdf/f433f.pdf
- Taxpayer Advocate Service — https://www.taxpayeradvocate.irs.gov/
Professional disclaimer: This article is educational only and does not replace personalized tax advice. Individual circumstances vary. Consult a licensed tax professional, enrolled agent, CPA, or tax attorney to discuss your situation and options.
