Relief from IRS Debt using Currently Not Collectible

Posted on February 6, 2024

Relief from IRS Debt using Currently Not Collectible

The IRS has various kinds of payment plans for tax debt resolution, one of which is Currently Not Collectible (CNC). This status is assigned to tax cases in which the IRS cannot collect any amount of tax debt and postpones collection. When a taxpayer is in CNC status, the IRS cannot initiate any collection actions until the individual’s financial situation improves.

IRS Debt Relief: Qualifying Requirements

In order to be eligible for Currently Not Collectible, a taxpayer needs to present documentation to prove to the IRS that they are incapable of paying any amount of the tax debt. The IRS considers income from all sources, assets and liabilities to determine ability to pay. If they determine that collection efforts will create a financial crisis for the taxpayer, they may grant Currently Not Collectible status.

The IRS also makes this assignment in certain other circumstances, such as instances when the taxpayer cannot be located. Currently Not Collectible does not mean that the tax debt is forgiven.

IRS Debt Relief: The Statute of Limitations

The statute of limitations is the maximum time the IRS has to collect back taxes. The statute of limitations for tax debt cases is 10 years. If the IRS cannot collect on a debt within 10 years, then the entire amount of tax debt is forgiven and the case is closed. Even though the IRS is required to close tax debt cases in 10 years, in some cases the IRS may try to collect back taxes even after the statute of limitations has expired.

After Obtaining CNC

After the IRS has assigned CNC status to a tax debt case, they regularly review the financial situation of the taxpayer to see if it improves. If there is a positive change to the individual’s financial situation, the IRS may begin collection actions. This review occurs periodically.

Currently Not Collectible is a useful method of avoiding IRS collection actions when tax debt cannot be paid. It allows debt relief when the taxpayer’s financial condition remains unchanged until the end of the statue of limitations.