IRS Currently Not Collectible (CNC)[1] is defined as the decision the IRS takes in concluding that a taxpayer has no ability to pay their annual federal income taxes. This type of status protects taxpayers from the “aggressive tactics of the IRS Collection Division” (Avvo.com, “Currently Not Collectible Status,” 8/18/2013). The IRS currently not collectible status is useful for taxpayers wishing to negotiate regarding their responsibility to pay off owed taxes. “Negotiating Currently Not Collectible status indicates to the IRS that you are serious about your responsibility to pay off taxes you may owe but do not have the funds to pay at this time” (Hein).
Key Takeaways
- The IRS can declare a taxpayer in“IRS currently not collectible” after receiving evidence of the taxpayer’s inability to pay. This type of evidence is typically obtained from the taxpayer on IRS Form 433-F, Collection Information Statement.
- Once a taxpayer is declared IRS currently not collectible, the IRS stops all collection activities, which include issuing levy and garnishment orders. The IRS sends an annual statement to the taxpayer outlining the outstanding tax.
- While the taxpayer is in not collectible status, the ten-year statute of limitations still applies within this context. However, if after 10 years the IRS still cannot the collect the tax, then the tax debt will expire.
The IRS can declare a taxpayer in“IRS currently not collectible” after receiving evidence of the taxpayer’s inability to pay. This type of evidence is typically obtained from the taxpayer on IRS Form 433-F, Collection Information Statement. A taxpayer can request to be considered currently not collectible by submitting the form to an IRS Revenue Officer or through the IRS Automated Collection System unit.
What Happens When a Taxpayer is Declared IRS Currently Not Collectible
Once a taxpayer is declared IRS currently not collectible, the IRS stops all collection activities, which include issuing levy and garnishment orders. The IRS sends an annual statement to the taxpayer outlining the outstanding tax. However, the annual statement is not considered a bill.
While the taxpayer is in not collectible status, the ten-year statute of limitations still applies within this context. However, if after 10 years the IRS still cannot the collect the tax, then the tax debt will expire.
The Internal Revenue Manual outlines procedures for how Service professionals will report accounts currently not collectible. According to IRM 1.2.14.1.14, Policy Statements for the Collecting Process, an account can be removed from active inventory after the collection process (IRS.gov, “Part 5. Collecting Process, Chapter 16. IRS Currently Not Collectible, Section 1. IRS Currently Not Collectible,” 8/18/2013). Taxpayers whose assets cannot be found are more likely to receive consideration for currently not collectible. Essentially, if the IRS has no means of enforcing collection, then the taxpayer’s account will become not collectible.
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[1] This is also known as transaction code 530.
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