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If you can’t pay taxes you owe to the IRS with assets or monthly income, you may be eligible to apply for Currently Not Collectible status. Learn how.
What is Currently Not Collectible status ?
Currently Not Collectible (CNC) status means that you can't pay your taxes, so the IRS won’t collect them right now.
When you owe taxes, the IRS will look to see if you can pay with a lump sum from your assets (like a savings account) and/or out of your monthly income. People who get assigned CNC status can’t pay their taxes with assets, and don’t have enough income to meet their necessary household living expenses, so there’s nothing to spare for a monthly tax payment.
Asking for CNC status is similar to setting up an ability-to-pay installment agreement. You'll need to give the IRS your financial information, including your sources of income, your necessary household expenses, and any equity in assets that you could use to pay the IRS.
How to apply for CNC status
- Complete Form 433 (A, B, or F, depending on your situation) and give the IRS that information by phone or mail. If you have any pending IRS collection enforcement activity (such as liens, levies, or passport restrictions), call the IRS to speed up the process.
- Supply supporting documents, which can include:
- Statements for all bank accounts
- Retirement account statements and retirement plan information
- Investment accounts
- Savings and other cash on hand
- Any other sources of income, such as business income. For business income, supply a profit/loss statement for the past year.
- All household expense receipts for necessary living expenses (housing, utilities, car payments, medical bills, health insurance, taxes paid, etc.)
- Statements showing your debts (credit cards, car payments, mortgages, etc.)
The IRS may ask for other documents to understand your ability to pay.
If you call the IRS to supply your Form 433 information, the IRS will ask for supporting documents to complete your agreement. If you have the information on hand, fax it to the IRS representative while you’re on the call. If not, send the information to the address the IRS representative gives you.
Once you’ve proven that you can’t pay with assets or monthly income after necessary living expenses (called monthly disposable income), the IRS will approve your CNC status.
How long does the CNC application process take?
This process can take months at the IRS–and several back-and-forth negotiations with the IRS--to get the CNC status approved. And CNC status is not permanent. If your income increases, the IRS can request new financial information to see if you still qualify.
You should receive a letter from the IRS (usually IRS Letter 4624C) to confirm that you have CNC status. You can also request your IRS account transcripts and check for IRS transaction code 530, showing that you are in CNC status.
We’re here to help
At Jackson Hewitt, we have 40 years of expertise to help you manage your tax issues. Whether simple or complex, our team of licensed professionals are trained to work directly with the IRS, while keeping you updated every step of the way. Start for free today and learn about how we can help resolve your tax issues
About the Author
Jim Buttonow, CPA, CITP, is the Senior Vice President for Post-Filing Tax Services at Jackson Hewitt. He’s been a leader in helping taxpayers and tax professionals resolve tax problems with the IRS, where he had worked for 19 years in various compliance-enforcement positions. Prior to his current role, Jim’s consulting practice focused on the areas of tax controversy and tax administration, which included leading product development on tax problem software for tax professionals, testifying before Congress, advocating for IRS transparency and efficiency, and proposing innovative large-scale solutions for taxpayers and tax professionals. Jim is also the author of Tax Problems and Solutions Handbook, a publication aimed at helping tax pros work more effectively in post-filing matters and resolving their clients’ most common tax problems.