Currently Not Collectible (CNC) status is a temporary IRS designation that stops collection activity (levies, seizures) when the IRS determines that collecting from the taxpayer would leave them unable to meet basic living expenses.
How it works: - Taxpayer (or their representative) requests CNC status. - IRS reviews the taxpayer's financial information (Form 433-A or 433-F) and compares income to IRS-allowed living expenses. - If expenses ≥ income (or disposable income is insufficient), the IRS classifies the account as CNC. - Collection activity stops — no levies or seizures while the account is CNC.
What CNC does NOT do: - Does NOT eliminate the tax debt. - Does NOT stop interest and penalties from accruing. - Does NOT stop the statute of limitations from running. - Does NOT prevent the IRS from filing a federal tax lien.
IRS review: The IRS periodically reviews CNC taxpayers (typically when they file future returns showing increased income). If financial situation improves, the IRS may resume collection.
CNC vs. Offer in Compromise: - CNC: Temporary; debt remains and accrues interest. - OIC: Permanent settlement; debt is resolved (for less than full amount).
Who qualifies: Taxpayers who have little or no disposable income after allowed living expenses, with no significant assets that could be liquidated.
Allowed expenses: IRS uses national and local standard allowances for housing, transportation, food, clothing, and healthcare. Taxpayers can claim actual expenses if they exceed the standards, in some cases.
> Exam tip: CNC status = IRS hits pause on collection but the debt continues to grow with penalties/interest. The collection statute continues to run. Know the difference between CNC (temporary) and OIC (permanent resolution).