If you owe tax debt you can’t pay, you might feel stuck. You’re not. The “Currently Not Collectible” (CNC) status exists for people facing real financial hardship.
This is not some limited-time offer you see in tax company ads. CNC status is a legitimate IRS program available to any taxpayer who qualifies.
What Is Currently Not Collectible Status?
Currently Not Collectible (CNC) status tells the IRS you cannot pay your tax debt right now. It’s also called hardship status.
When the IRS places your account in CNC status, they stop active collection. That means no wage garnishments. No bank levies. No asset seizures.
The debt doesn’t disappear. It stays on your account. But the IRS agrees to leave you alone while you’re in hardship. Think of it as pressing pause on IRS collections. This can be crucially helpful as the revenue service is consistently improving its collection efforts. The IRS collected $77.6 billion through its collection function in 2024, which is 13.6% more than the previous year.
The Difference Between Federal and New York State CNC
Federal and New York State tax debts work differently.
For federal taxes, the IRS has 10 years to collect federal tax debt. This is called the Collection Statute Expiration Date (CSED). After 10 years, the debt expires and the debt is unenforceable (unless tolling events apply such as bankruptcy or absence from the US).
New York State, meanwhile, has 20 years to collect state tax debt. That’s double the time. The 20-year New York statute starts from the first date a warrant could be filed, not when it was actually filed.
The IRS and the New York State Tax Department each offer hardship programs. New York’s program has fewer formal procedures, though many taxpayers get confused due to the lack of information online.
Attorney John D’Amato has handled both federal and state tax debt cases for over 29 years. He opened John D’Amato Law Offices in 1999 specifically to help individuals and families resolve IRS and state tax problems.
Who Qualifies for CNC Status?
You must prove financial hardship to the IRS. You might qualify if:
- Your monthly expenses exceed your income
- Your income barely covers basic living costs
- You have no income
- Your only income is Social Security, welfare, or unemployment
- You’re unemployed with no other income source, OR
- Paying even $25 per month would cause economic hardship.
The IRS won’t just take your word for it. You need to document everything.
What the IRS Considers Hardship
The Taxpayer Advocate Service defines hardship as when paying would prevent you from meeting basic living expenses. This is different from inconvenience.
Nobody wants to pay taxes. That’s inconvenient. But not being able to feed your family or keep your home is a hardship.
The IRS uses specific allowable living expense standards. These come from the Census Bureau and the Bureau of Labor Statistics data.
National standards cover:
- Food, clothing, and personal care
- Housekeeping supplies
- Out-of-pocket healthcare costs.
Local standards cover:
- Housing and utilities (based on your county)
- Transportation (ownership and operating costs by region).
For example, the IRS allows $662 per month for one car ownership. If your car payment is $1,200, they’ll only count $662.
The IRS may allow exceptions for high medical expenses. A tax attorney can help you get the largest allowable expenses for your situation.
How to Apply for Currently Not Collectible Status
Step 1: File All Past Due Returns
You must be current on filing. The IRS won’t consider CNC status if you have unfiled returns.
Can’t pay what you owe on those returns? File anyway. The IRS may still grant hardship status even with unfiled returns if you meet the requirements. Although not the norm, in limited situations, CNC can be approved with unfiled returns if filing requirements are being resolved.
Step 2: Gather Financial Documentation
You’ll need:
- Last three months of bank statements
- Pay stubs showing current income
- Documentation of monthly expenses
- Receipts for medical expenses
- Proof of necessary living costs
- Asset information (on your cars, property, investments, and other assets).
Step 3: Complete the Required Forms
The IRS will likely ask you to complete:
- Form 433-A (Collection Information Statement for Wage Earners and Self-Employed)
- Form 433-F (Collection Information Statement)
- Form 433-B (Collection Information Statement for Businesses).
These forms give the IRS a complete picture of your finances.
Step 4: Contact the IRS
You can write or call. Calling is usually faster.
- For individuals: (800) 829-1040
- For businesses: (800) 829-4933
If you’re prepared with Form 433 and supporting documents, you can fax them during the call. You may get a preliminary decision right away.
Step 5: Wait for the IRS Decision
The IRS reviews your financial information against their allowable expense standards. They calculate your disposable income. If no disposable income remains after allowable expenses, CNC may be approved.
What Happens When You’re in CNC Status
The IRS must stop these collection activities:
- Wage garnishments
- Bank account levies
- Property seizures
- Continuous collection calls
- Threatening letters.
But the IRS will:
- Continue charging interest and penalties (your debt grows)
- Keep any tax refunds you’re owed
- File a Notice of Federal Tax Lien if you owe more than $10,000
- Send annual reminder notices
- Monitor your tax returns each year.
How Long Does CNC Status Last?
CNC status isn’t permanent. It lasts as long as your hardship continues.
The IRS assigns a closing code to your case. This code indicates when they’ll review your situation again. The timeline depends on your specific circumstances. Some people stay in CNC status for years. Others see their situation improve quickly.
The IRS reviews your filed tax returns each year. If your income increases significantly, they may remove CNC status and restart collections.
What If the IRS Denies Your Request?
You have options.
First, request a meeting with an IRS collection manager. They can review the decision.
You can also appeal collection actions through the Collection Appeals Program (CAP). While you can’t appeal the CNC denial itself, you may be able to appeal other collection actions.
A tax attorney can help you understand your appeal rights and represent you.
The CSED and Strategic Planning
Here’s something important: The 10-year collection statute, also known as the CSED, keeps running while you’re in CNC status.
The IRS collected more than $16 billion through installment agreements in 2024. That’s a 12% increase from the previous year. But rather than proposing an installment agreement, some taxpayers strategically use CNC status to run out the clock on their collection statute.
If the CSED expires while you’re in CNC, the tax liability disappears. The IRS can no longer collect it. This is one advantage CNC status has over an Offer in Compromise (OIC). With an OIC, submitting the offer stops the CSED clock. With CNC, the clock keeps running.
Note, however, that the IRS Internal Revenue Manual emphasizes proper action before the collection statute expires is a priority. They may take action if they think the statute is about to expire.
When the IRS Can Extend the CSED
Certain actions pause or extend the 10-year collection period:
- Filing bankruptcy
- Requesting an Offer in Compromise
- Requesting a Collection Due Process hearing
- Requesting innocent spouse relief
- Living outside the US for six months or longer
- Signing a waiver to extend the CSED.
Never sign a waiver without consulting a tax attorney first.
What Happens If Your Situation Improves
The IRS monitors your account. When your financial situation gets better, they’ll restart collections. They check the income reported on your annual tax returns. A significant increase may trigger a review.
You’ll receive notice before the IRS removes CNC status.
What Happens If Your Situation Gets Worse
You can remain in CNC status. Contact the IRS to update your financial information.
If you’re facing eviction or utility shut-off, the Taxpayer Advocate Service may help you get your refund. For help with complex tax situations, don’t hesitate to contact Attorney John D’Amato, who offers a free, confidential consultation.
New York State Hardship Status
New York offers a similar hardship program. But the state doesn’t publicize it like the IRS does.
Unlike federal CNC, New York State hardship generally lasts one year. You must complete a financial form annually. This works well for disabled or retired taxpayers whose situations won’t change much.
The state usually files a tax lien or warrant even in hardship status.
You might need New York hardship if:
- You have a home with equity, but can’t access it
- You’re young and denied an Offer in Compromise
- You applied for an OIC but were denied, OR
- You don’t make enough for a payment plan.
Common Mistakes to Avoid
- Don’t wait too long. New York’s 20-year collection statute gives them more time than the IRS. Starting early gives you more options.
- Don’t hide assets. The IRS will find them. Hiding assets can result in penalties and criminal charges.
- Don’t agree to an installment plan you can’t afford. Be honest about what you can pay. If you can’t afford $25/month, say so.
- Don’t sign extensions without legal advice. Extending the collection statute rarely benefits you.
- Don’t ignore IRS letters. Missing deadlines makes everything harder.
When CNC Status Isn’t the Right Solution
CNC status works for temporary hardship. But it might not be your best option if:
- You have assets you could use to pay
- Your income will increase soon
- You want to resolve the debt permanently
- A tax lien will significantly harm your credit, OR
- You’re close to buying a home or need to borrow money.
Other options exist to ease your tax burden with the IRS:
- Installment agreements
- Offer in Compromise
- Penalty abatement
- Innocent spouse relief
- Bankruptcy (for some tax debts).
Why Work with a Tax Attorney
The IRS and New York State use strict standards. They deny many CNC applications.
A tax attorney knows:
- How to present your financial information effectively
- Which expenses the IRS will accept
- How to handle complicated cases
- When CNC status makes sense strategically
- How to negotiate with IRS agents
- The difference between federal and state requirements.
John D’Amato has resolved numerous tax debt cases. His clients consistently praise his thorough approach and genuine care.
One client shared, “John D’Amato was extremely realistic and sincere. I never had an experience with an attorney before that was so positive. John was thorough and upfront. I knew I could trust him from the start.”
Another said, “I don’t think I could have a better lawyer than Mr. John D’Amato. Mr. John D’Amato saved my life and gave me a new life to start fresh.”
Yet another client shared, “John and his employees handled my situation quickly. Kept in contact through everything and even got back more money than expected.”
The Real Cost of Doing Nothing
The IRS Data Book shows the agency processed more than 266 million returns in 2024. They’re not going away. They’re not forgetting about your debt.
Interest and penalties compound daily. A $10,000 tax debt can easily become $20,000 or more.
The IRS garnishment limits depend on exemptions, usually, 25%+ disposable income. They can empty your bank account. They can seize your property.
New York State is even more aggressive. They can suspend your driver’s license if you owe more than $10,000.
Call John D’Amato About Requesting Currently Not Collectible Status in New York. Free Consultation.
You don’t have to face the IRS or New York State alone.
Our team at John D’Amato, PLLC has helped individuals and families across New York resolve tax debt for nearly three decades. The firm has consistently earned top ratings for tax resolution work.
One client said, “John and his support staff were excellent. John always took the time to answer my questions right away, either by phone or email. Super efficient and friendly team. I’d recommend his firm to everyone and anyone needing legal advice and representation.”
Contact John D’Amato, PLLC, today for a free consultation. We’ll review your situation and explain your options clearly.
Call (716) 703-9099 now.
We understand financial problems happen to good people. Medical bills. Job loss. Divorce. You’re not alone. We’re here to help.
Don’t let tax debt control your life. Currently Not Collectible status might be the relief you need. Let us help you determine if it’s right for you.
John D’Amato is an experienced New York tax attorney with over 29 years helping individuals and families resolve IRS and state tax problems. He graduated from law school in 1992 and opened John D’Amato Law Offices in 1999 to concentrate on bankruptcy and tax debt resolution.