Currently Not Collectible

If you are unable to pay your tax liabilities and there is no way that the IRS can collect on that debt by the normal resolution processes you may be eligible for Currently Not Collectible (CNC) status.

In order to obtain a CNC status, you will have to prove to the IRS that paying your tax liabilities would create an economic hardship for you.

CNC General Rule of Thumb

If your income is under the IRS’s allowable expenses, the IRS may qualify you as uncollectible. In most cases, they will still require you to be in full compliance with your filings, though exceptions do exist. You may also have to resolve the issues as to why you fell behind with your taxes in the first place.

The IRS will closely review your financial status including details of your monthly income and expenses, as well as your assets and liabilities. They will determine your ability to pay back taxes by comparing your living expenses to its standards for costs deemed necessary by the IRS. Necessary expenses are those that are essential to you and your families health and welfare.

If your wages will not cover your living expenses and you have no assets that the IRS can seize to pay the debt you may be deemed uncollectible until your situation changes. They will require a financial statement each year to show whether you are qualified to maintain CNC status.

If your financial status changes enough to warrant it, the IRS will proceed with other collection means. If the 10-year statute of limitations (CSED) expires while you are on CNC status, the tax debt will remain permanently uncollectible.