If you don’t have the financial ability to pay taxes, you may qualify for the IRS to place your account into currently not collectible. This means that you can postpone paying taxes to the IRS until you are financially able to pay.
As long as your account remains in currently-not-collectible status, the IRS will not levy or attempt to collect the debt.
However, for the IRS to consider placing your account currently not collectible, you must meet the eligibility criteria. Learn more about what currently-not-collectible status means and how to qualify.
Once an account is reported as currently not collectible, the IRS stops all collection activities, including the issuance of lien and garnishment orders.
It is important to understand that the currently-not-collectible status does not eliminate the tax debt; it only temporarily stops the collection of taxes by the IRS. Therefore, you will still owe the tax due, and penalties and interest will continue to accrue as long as your account remains in CNC status.
Within this context, the 10-year statute of limitations still applies. However, if after 10 years the IRS is still unable to collect the tax, the tax debt will become due.
The IRS will perform a financial analysis based on the information you provide on Form 433 or Form 433-a.
To decide if you qualify for a currently-not-collectible status, the IRS will consider whether you meet one or more of the following requirements:
- There are only a few more years left in the 10-year statute of limitations the IRS has to collect your debt.
- Your income is less than $84,000 a year.
- Your living expenses are within IRS guidelines.
- You have little or no money left at the end of the month after paying your basic living expenses.
- You receive income only from Social Security benefits, welfare benefits, or unemployment benefits.
- You are unemployed and have no other source of income.
To complete the financial analysis, the IRS may request additional documentation to verify your income and expenses.
If you qualify for currently-not-collectible status, the IRS will place a “closing code” on your account. This code will tell the IRS when to review your file to determine if your financial situation has changed.
IRS currently-not-collectible status typically lasts anywhere from six months to more than two years.
If the IRS reports your account is currently not collectible, it will periodically review your account to see if your financial situation has changed and if you now have the financial ability to pay your taxes.
As long as your financial situation remains the same, your account will remain currently not collectible.
In order to apply for currently-not-collectible status, you must contact the IRS directly or hire a tax professional to contact the agency on your behalf.
An IRS representative will ask you to provide information about your income and expenses to complete the financial analysis and determine whether or not you qualify for CNC status. You may also need to provide documentation to support that information.
If you don’t qualify for currently-not-collectible status, you may qualify for an installment agreement with the IRS, which can make your tax payments more manageable.
Consider consulting with a tax professional before making any decisions about the best way to resolve your particular tax matters.