What CNC Status Means
When the IRS determines a taxpayer cannot pay their tax liability without being unable to meet basic living expenses, it places the account in Currently Not Collectible status. While in CNC, the IRS will not levy bank accounts or wages, will not seize property, and will not pursue active collection.
How the IRS Evaluates CNC Eligibility
The IRS compares the taxpayer's income to their allowable living expenses (using National and Local Standards). If income does not exceed necessary expenses by a meaningful amount, CNC may be appropriate. The taxpayer must document their financial situation.
Important Limitations
- CNC is not permanent — the IRS reviews accounts periodically and may restart collection if financial circumstances improve
- The 10-year collection statute of limitations continues to run during CNC periods
- Interest and penalties continue accruing on the outstanding balance
- Tax liens may remain in place even in CNC status
CNC vs. Offer in Compromise
CNC is a temporary pause; an Offer in Compromise is a permanent settlement. For taxpayers unlikely to ever be able to pay, CNC combined with waiting for the statute to expire may be a viable strategy — though this requires careful professional evaluation.
Disclaimer: This glossary entry is for general educational purposes only and does not constitute legal or tax advice. Laws change frequently and vary by individual circumstances. Consult a licensed California attorney or CPA for guidance on your specific situation.