What Currently Not Collectible Status Means
CNC status is the closest match to a “hardship program.” Collection refers to the steps the IRS takes to get you to pay a tax bill you owe. If you can’t pay because of financial hardship, you can request that the IRS place your account in CNC status, which temporarily suspends most collection activities.
CNC gives you breathing room, but the debt stays. According to the IRS collection process page, CNC means the IRS decided you can’t afford to pay right now. You still owe the full amount, and penalties and interest keep adding up until it’s paid. The IRS may also review your finances later and restart collection if your situation improves.
How To Qualify for CNC Status
In order to first qualify for CNC status, you must request to be placed on CNC status. To do so, you would need to call the IRS directly at 800-829-1040; or if you have received a notice, call the phone number on your bill or notice. The Taxpayer Advocate Service, an independent organization within the IRS, lists these steps to help prepare for your request to enter CNC stats:
- File any required prior-year tax returns.
- Keep filing your returns on time.
- Gather documents that show your income and expenses, including any debts.
- Be ready to share that financial information, since the IRS may require it to decide.
The Taxpayer Advocate Service also suggests looking at payment options you can afford before asking for CNC.
IRS Payment Plans When You Can’t Pay in Full
If you can pay over time, a payment plan may work better than CNC. The IRS offers two kinds of plans:
- Short-term plan. You pay in full within 180 days or less, and there’s no setup fee. You can apply online if you owe less than $100,000.
- Long-term plan. This is also called an installment agreement, meaning you pay what you owe in monthly payments. You can apply online if you owe $50,000 or less and have filed all required returns.
Long-term plans may have setup fees, though fees are reduced for low-income taxpayers. Penalties and interest continue with either plan until you pay in full. Learn more in How does an IRS payment plan work?
How an Offer in Compromise Settles Tax Debt
An offer in compromise (OIC) is a deal to settle your tax debt for less than you owe. It’s for people who can’t pay or who would face financial hardship by paying. The IRS looks at your income, expenses, asset equity, and ability to pay.
Applying requires a $205 fee and a first payment unless you meet the low-income qualifications. The forms are in the IRS Form 656-B booklet. For more, see What is an IRS offer in compromise?
Comparing IRS Hardship Program Options
| Option | What it does | Do you still owe the full amount? | Costs to know |
|---|---|---|---|
| Currently Not Collectible | Pauses most collection for now | Yes | Penalties and interest keep growing |
| Short-term payment plan | Gives you 180 days or less to pay | Yes | $0 setup fee, plus penalties and interest |
| Long-term payment plan | Spreads your bill into monthly payments | Yes | Possible setup fee, plus penalties and interest |
| Offer in compromise | Settles your debt for less than you owe | No, if the IRS accepts | $205 fee and first payment, unless low income |
Watch Out for Companies Selling a “Special IRS Program”
Some companies claim they can get you into special IRS programs, sometimes using names like “IRS hardship program.” The options above are the IRS’s own, and you can ask the IRS about them directly. Read What is tax debt relief, and is it legitimate? before you pay anyone for help.
Sources
- IRS, Temporarily delay the collection process
- IRS, Topic no. 201, The collection process
- Taxpayer Advocate Service, Currently not collectible
- IRS, Payment plans; installment agreements
- IRS, Offer in compromise
- IRS, An offer in compromise could help taxpayers resolve tax debt
- IRS, IRS Form 656-B booklet
