The IRS accepts taxpayers into the Currently Not Collectible (CNC) program if they have no financial ability to pay any amount of their tax debt. Following the guidelines of the Currently Not Collectible program, the IRS ceases all collection activities, including levies and garnishments, until they see an improvement in the financial condition of a taxpayer.
Accounts may be declared CNC for a variety of reasons, including the inability to locate a taxpayer, the expiration of the statutory period for collection, the death of a taxpayer with no debt recovery potential or means of enforcing collections.
The IRS sends a statement to the taxpayer every year while their account is in Currently Not Collectible status, detailing information about the amount of tax debt. If there is no ability to pay any amount of tax debt, the IRS will keep postponing collection while under CNC.
Currently Not Collectible status is not permanent. A periodical reassessment of a taxpayer’s financial capability occurs every two years while in the status. The statute of limitations, which extends for 10 years, applies to CNC. If the IRS is unable to collect the tax debt in 10 years, like with any program, the debt expires along with the clock.
Financial hardship due to bankruptcy, death, divorce, theft, damage due to natural disasters may cause inability to pay the tax debt. Taxpayers that have no means to pay the debt, including taking a loan may consider Currently Not Collectible status to avoid or stop IRS collection actions.
Taxpayers who have a limited capability of paying their tax debt amount cannot use the CNC program. It is essential to seek professional tax debt help before selecting and applying for a tax debt resolution plan, as it involves various guidelines and qualifying factors that must be fulfilled.