5 Things You Should Know About the IRS CNC Status

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If you are unable to pay your tax debt through an installment plan, you could qualify for currently not collectible (CNC) status with the IRS. This valuable program can provide relief when you need it most. Keep the following in mind as you consider whether CNC is a realistic option for your situation:

1. CNC Involves IRS Form 53

IRS Form 53 signifies that a given account is currently not collectible. This essential document is also known as the “Report of Currently Not Collectible Taxes.” Some tax advisors refer to the process of deeming an account not collectible as “53ing,” due to the significant role this critical IRS form plays.

2. Refund Offsets Are Common Among CNC Taxpayers

Don’t get too excited about that upcoming federal tax refund. If your account is declared not collectible, the IRS will likely seize your refund and apply it to your current balance.

3. The IRS May Set Limits on Expenses

CNC status grants the IRS considerable say over your finances and living situation. For example, if the IRS deems your current car payment excessive, you may need to reduce it considerably to qualify as a CNC taxpayer.

4. CNC Status Can Change Unexpectedly

Don’t assume that your account will remain uncollectible. The IRS regularly reviews financial information to determine which taxpayers qualify over time. As soon as your situation changes — for example, if you get a job following a lengthy period of unemployment — you can expect collection activity to resume.

5. The IRS May Eventually ‘Write Off’ Your Tax Debt

The caveat to the potential for revoked CNC status: after ten years, the IRS may be barred from collecting on your account. Known as the collection statute of limitations, this rule likely applies unless you’ve left the country or filed an offer in compromise.

Are you ready to take on CNC status with the IRS? The Highland Tax Group can help. Look to our enrolled tax agents for assistance.