Currently Not Collectible

The Currently Not Collectible Status (“CNC”) is a status that the IRS can grant to individuals or businesses whom it has determined are unable to repay their delinquent taxes.  Internally, the IRS sometimes refers to Currently Not Collectible Status as “Status 53.”

Although penalties and interest will continue to accrue on the unpaid taxes, the IRS generally will not take enforcement action such as bank levies, wage levies (garnishments), seizure of assets, and accounts receivable levies while a taxpayer’s account is in CNC status. However, the IRS will very likely file a Notice of Federal Tax Lien for liabilities in excess of $10,000 (if it hasn’t already) prior to granting CNC status.

The IRS has a laundry list of reasons why it might place a taxpayer into CNC, most of which aren’t applicable to a business or individual who is actively looking for relief from the IRS (taxpayer is deceased, business entity is defunct or bankrupt, unable to locate taxpayer, etc.).

For the rest of us — operating businesses and living individuals who haven’t vanished — obtaining CNC status will require two things:

1. The taxpayer must be in compliance with all current tax obligations (e.g. all tax returns have been filed, current tax obligations are being paid); and
2. The taxpayer must demonstrate, usually via full financial disclosure, that it is able to pay current tax obligations, but unable to pay anything towards the tax debt.  For individuals, this means that the individual will not be able to meet their necessary living expenses while repaying anything toward their tax liability. For businesses, this means that the business will not be able to meet its necessary business expenses while also repaying anything toward its tax liability.