Jim Buttonow, CPA, CITP
SVP Post-Filing Tax Services
Updated on: July 12, 2022
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If you can’t pay your taxes, the IRS can put you in currently not collectible status (CNC or Status 53). This means that you can’t pay now, but you may be able to pay later.
The question for most people with this status is, “When will the IRS ask me to start paying again?”
In other words, does CNC status last forever? The answer lies in how the IRS put you into CNC status.
If you are an individual taxpayer (Form 1040 filer), the IRS can put you in CNC status for several reasons:
Let’s look at the first situation: Your documented living expenses are more than your income.
If the IRS eventually grants you CNC status after you provide extensive supporting documents for your income, expenses and assets, the IRS will review your status every year. The IRS will base its review on your total positive income (TPI). TPI is the gross income amount you report on your return (not just taxable amounts). Or, if you didn’t file a return, the IRS will look at the income that your employers, banks, etc, report to the IRS under your Social Security number.
The IRS may remove you from CNC status or roll your new balance into your CNC status.
If you got assigned CNC status in the past 12 months, IRS procedures generally will allow you to roll your new balance into your CNC status. If your new balance significantly increases the amount you owe, the IRS may want to investigate whether you still qualify for CNC status. When this happens, many people remind the IRS of the procedure that allows you to stay in CNC status for 12 months.
If you have obvious sources of new reportable income and assets, expect the IRS to exit you from CNC status.
If you are in CNC status, the IRS may ask you to pay again when your income is more than the expenses that you used to get into CNC status. CNC may last forever if your financial situation doesn’t improve. At the end of the IRS collection statute of limitations, the IRS will write off the balance owed.
The IRS doesn’t always remove you from CNC status if your circumstances improve. The IRS also considers its own resources. If the IRS doesn’t have the resources to collect, you may stay in CNC status for another year. How do you know? Ask the IRS about your status.
For help creating a strategy to address your tax issue, visit Jackson Hewitt’s Tax Resolution Hub to see how we can help.
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.