Every payment plan assumes you can pay something. Some people cannot. If your income barely covers rent, food, utilities and getting to work, even a small monthly payment to the IRS may be out of reach. For that situation, the IRS has a status called currently not collectible, often shortened to CNC.
CNC is not forgiveness. The debt stays on the books. But it can stop the IRS from actively trying to collect while your finances are this tight.
What currently not collectible means
The Internal Revenue Manual (IRM 5.16.1.1.1) explains that the IRS has authority to determine that some accounts are currently not collectible, balancing the potential for collection against its cost and ability to collect. Accounts can be placed in CNC status for several reasons, such as being unable to locate the taxpayer, a business that has closed, or a statute that has expired (IRM 5.16.1.2). For individuals who owe and cannot pay, the reason that matters is hardship.
Who qualifies for hardship status
According to the IRM (5.16.1.2.9), a hardship exists if you are unable to pay reasonable basic living expenses. The IRS decides based on your financial information, reported on a collection information statement such as Form 433-A. The IRM describes typical hardship cases as involving no income or assets, no equity in assets, or not enough income to make any payment without causing hardship.
The flip side is just as important. The IRM says an account should not be reported as CNC if you have income or equity in assets that the IRS could collect without causing hardship. The IRS's campus procedures (IRM 5.19.17.2.4) add that basic living expenses vary with your circumstances, but they do not include maintaining an affluent or luxurious standard of living.
Hardship status is available to individuals, including joint filers, sole proprietors, partnerships where a general partner is personally liable, and LLCs where an individual owner is the liable taxpayer (IRM 5.16.1.2.9).
Do you need a financial statement?
Generally, yes. The IRM (5.16.1.2) says the IRS will generally get a collection information statement before reporting an account CNC, and that statement is considered current if it is less than 12 months old. The IRM (5.16.1.2.9) allows exceptions for smaller balances when certain conditions exist: a terminal illness or excessive medical bills, incarceration, income only from Social Security, welfare or unemployment, or unemployment with no source of income. The IRS may still ask for documents to confirm your situation.
What CNC status does for you
- Active collection stops. The account is removed from active collection inventory (IRM 5.16.1.1.2).
- Wage levies are released. Internal Revenue Code section 6343(e) requires the IRS to release a levy on your wages as soon as practicable once it agrees the tax is not collectible. Section 6343(a)(1)(D) also requires release of a levy the IRS determines is creating an economic hardship. The IRM (5.16.1.2.9) says levies on wages must be released before an account is closed as hardship.
- Passport certification is reversed. The IRS excludes debts that are CNC due to hardship from passport certification under section 7345, and the IRM (5.16.1.2.9) says it will reverse a certification within 30 days if a certified taxpayer is later found to be CNC due to hardship.
What CNC status does not stop
| Item | What happens in CNC status | Source |
|---|---|---|
| Interest | Keeps accruing until the tax is paid. The underpayment rate is 7% for October 1 to December 31, 2026, compounded daily. | IRC 6601(a), 6621, 6622 |
| Failure-to-pay penalty | Keeps adding up each month the tax is unpaid, until it reaches its 25% cap. | IRC 6651(a)(2) |
| Federal refunds | The IRS can apply a future refund to the debt. | IRC 6402(a) |
| Tax lien | A Notice of Federal Tax Lien is generally filed when the unpaid balance is $10,000 or more. | IRM 5.16.1.2 |
| Collection statute | Keeps running. The IRS generally has 10 years from assessment to collect. | IRC 6502 |
Interest and penalties keep growing
Section 6601(a) charges interest from the due date "to the date paid." CNC does not change that. The failure-to-pay penalty under section 6651(a)(2) is 0.5% for each month the tax stays unpaid, up to 25%. So the balance you owe will likely be larger when your account comes out of CNC than when it went in.
Refunds can be taken
Section 6402(a) lets the IRS credit an overpayment against any federal tax you owe. If you are in CNC status and file a return showing a refund, expect it to go toward the old debt.
The collection clock keeps running
This is the part of CNC that can work in your favor. Under section 6502, the IRS generally must collect within 10 years after assessment. The Code suspends that period for specific events, such as while an installment agreement request or an offer in compromise is pending (section 6331(k)(3)). Being placed in CNC status is not one of those events, so time keeps running while your account sits in CNC. If your situation never improves, some or all of the debt may reach its collection statute expiration date. That is not guaranteed, and the IRS watches accounts that are close to expiring (IRM 5.16.1.2.2.1).
How the IRS decides to reopen your case
CNC is meant to be temporary. For hardship accounts, the IRS uses an automatic follow-up tied to your income. When it closes your case, it picks a closing code based on your allowable annual living expenses. It then reviews your total positive income each year when you file a return. If your income rises above the level tied to that code, the account can be reactivated (IRM 5.16.1.6; IRM 5.19.17.2.4).
The IRM gives an example. A taxpayer with allowable expenses of $22,000 is closed with a code tied to $28,000. The account will be reissued when the taxpayer files a return showing income of $28,000 or more (IRM 5.16.1.6). In some cases the IRS sets a specific follow-up date instead, for example when it expects a debt payment to end and free up cash.
Filing and compliance still matter
The IRS runs a compliance check when it considers CNC, and open filing requirements generally must be resolved (IRM 5.16.1.2). The IRM (5.16.1.2.9) also says an account can be reported as hardship even with unfiled returns if your financial statement can be verified, and that once hardship is verified, a levy cannot be used to pressure you into filing. Still, file every return you are required to file. It keeps your options open. See why unfiled returns matter.
How to ask for CNC status
- Gather your numbers. List monthly income from every source and your necessary expenses: housing, utilities, food, transportation, health care, court-ordered payments and taxes withheld.
- Complete a collection information statement. The IRS uses forms such as Form 433-A or Form 433-F. Be accurate. The IRS checks income records and other sources (IRM 5.16.1.2.9).
- Call the number on your most recent IRS notice and explain that you cannot pay without being unable to meet basic living expenses. If a revenue officer is assigned, work through that officer.
- Gather proof of unusual circumstances, such as medical bills or a disability.
- Keep your address current and file future returns on time.
If you can afford a small payment, the IRS may offer a partial payment plan instead. The IRM (5.19.17.2.4) notes that a taxpayer who meets hardship criteria may ask for an installment agreement rather than CNC. See partial payment installment agreements, and use the payment plan calculator to see what a small payment would do.
CNC or an offer in compromise?
CNC pauses collection, but the debt keeps growing. An offer in compromise, if accepted, settles the debt for less. If your situation is unlikely to improve, compare the two. Read offer in compromise or payment plan for the details.
Getting help
CNC status turns on your financial statement, and small mistakes can lead to a payment demand you cannot meet. If you are facing a wage levy, have equity in a home or retirement account, or are unsure whether CNC or an offer fits better, talk to a tax attorney. You can reach our office through GetIRSHelp.com or at (813) 229-7100. If you are just getting started, read owe the IRS but can't pay.
Frequently asked questions
What does currently not collectible mean?
It means the IRS has decided not to actively collect for now because collection would leave you unable to pay reasonable basic living expenses. The debt is not forgiven, and the IRS can reactivate the account if your income rises.
Does interest stop when my account is currently not collectible?
No. Interest under section 6601(a) runs until the tax is paid, and the failure-to-pay penalty keeps adding up until it reaches its 25% cap.
Will the IRS take my refund while I am in CNC status?
It can. Section 6402(a) allows the IRS to apply an overpayment to any federal tax you owe, so a future refund will likely go toward the debt.
Does the 10-year collection period keep running during CNC?
Yes. CNC status is not one of the events the Code lists as suspending the collection period under section 6502, so the clock keeps running while your account is in CNC.
Will the IRS file a tax lien if I am in CNC status?
Possibly. The IRM says a Notice of Federal Tax Lien should generally be filed on accounts reported CNC when the aggregate unpaid balance is $10,000 or more.
How does the IRS decide to reopen my case?
For hardship cases, the IRS reviews your income each year when you file. If your total income rises above the level tied to your case's closing code, the account can be reactivated.
This guide is general information, not legal advice. Tax law changes and every case turns on its own facts.