IRS Categorizes Your Account As “Currently Not Collectible”

by
Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC

When you cannot pay both your tax obligations and your basic living expenses — and when IRS and you agree on the amount you owe in taxes — then IRS may put your account in the file it calls Currently Not Collectible (CNC).

During the time your account is categorized as CNC, the IRS won’t try to seize your assets or income; however, it will continue to add interest and penalties to your account.  Plus, it may keep any refunds due to you and apply them to your tax debt. In addition, you will receive an annual invoice from IRS, which the law requires.

If you ask IRS to categorize your account as CNC, it will usually ask you to provide financial information including income and expenses, plus any past due tax returns. This helps IRS decide whether you have assets you can sell or whether you can get a loan.

When IRS conducts its annual review of your income, it may collect the balance due if your finances have improved. 

IRS can try to collect your taxes for a maximum of ten years from the date they were assessed.  In some circumstances, IRS might suspend the ten-year period.  While the suspension is in effect, the time period IRS has to collect the tax is extended by the same amount.

However, the IRS will not suspend your interest and penalty charges, even if it does not try to collect the balance due.  This is why it’s a good idea to have a trusted bankruptcy attorney review other payment options before you ask IRS to classify your account as CNC.

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Richard Fonfrias, J.D.

Chicago’s Financial Rescue & Bankruptcy Lawyer

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Founder & Managing Partner

Fonfrias Law Group, LLC

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