The IRS no longer collects taxes placed in Currently Not Collectible (CNC) status. Initially, this means the IRS reviewed the taxpayer’s income, expenses, and assets, proving the taxpayer’s inability to pay the tax balance. Regardless, the IRS cannot force a taxpayer into a financial hardship situation by collecting on a tax debt.
This Currently Not Collectible status is reviewed annually upon submission of your tax returns. However, the IRS can request updated financials at any time. Furthermore, the IRS has a statute of limitations to collect on the tax debt. Additionally, taxes accepted into the Currently Not Collectible status will expire annually. This is ten years from the filing date of each corresponding tax return.
An example of the IRS statute of limitations is as follows. A balance incurred on April 15th, 2013, will expire on April 15th, 2023. The IRS will apply the taxpayer’s future refunds to the oldest tax balance owed. This rule works in sequence until the balance from the most senior tax year is satisfied or until it expires, whichever comes first.
For taxpayers who file a return with a new balance, the taxes will not be included in the Currently Not Collectible status. New financials are required to keep the Currently Not Collectible in good standing.
