Currently Not Collectible: Do You Qualify for IRS Hardship

Do you owe the IRS money but can't pay because you're struggling to meet basic needs? If so, you may qualify for a hardship agreement known as Currently Not Collectible (CNC) status.

Think of CNC status as a "strategic pause" on IRS collections. When your account is placed in CNC (internally referred by the IRS as Status 53), the government acknowledges that you cannot afford to pay your tax debt without experiencing significant financial hardship.

What CNC Status Does for You:

• Stops Aggressive Collection: Halts most wage garnishments, bank levies, and property seizures.
  
  
• Eliminates Collection Calls: You will no longer receive the standard "threat" letters or calls.
  
  
• Buys Time: Allows you to focus on essential living expenses while your financial situation stabilizes.

Important Note: CNC status is not debt forgiveness. Your tax liability remains, and interest and penalties will continue to accrue. However, as long as you remain in this status, the IRS will not pursue active collection efforts against you.

One of the most significant advantages of CNC status is its interaction with the IRS’s 10-year statute of limitations on tax collection. Once a tax debt reaches the 10-year mark, the IRS can no longer legally collect it.

A major benefit of CNC status is that the 10-year clock does not stop while your account is in this status. As long as you remain in CNC, you move closer to the point where your tax debt could expire without payment.

To qualify, you must prove that paying your tax debt would create serious financial hardship, preventing you from covering essential living or business expenses. However, the IRS will keep an eye on your tax return, and if your income significantly exceeds the previous year's filing, then it may review your financial situation. You may lose CNC status if your income increases or assets become available.

1. Ensure Tax Compliance

The IRS will not grant hardship status if you have missing tax returns. You must be compliant (all past 6 years of returns filed) before they will process your request.

2. Gather Your Financial Documentation

You must prove that your income only covers "allowable" expenses. Collect:

• Three months of bank statements and pay stubs.
• Records of rent/mortgage, utilities, and insurance.
• Medical bills and out-of-pocket healthcare costs.

3. Review the 2026 IRS National Standards

The IRS uses National and Local Standards to determine what you "should" be spending on food, clothing, and housing. If your actual expenses exceed these, the IRS may ignore the difference unless you provide a strong justification.

4. Complete the Right IRS Collection Information Statement

Depending on your debt amount and situation, you will need to file one of the following:

• Form 433-F: The standard short-form for most individuals.
• Form 433-A: A more detailed form required if your case is assigned to a Revenue Officer or involves high balances (typically over $50,000–$100,000).
• Form 433-B: For businesses with payroll or income tax debt.

5. Contact the IRS (or Hire a Pro)

You can call the IRS directly at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses) to request a review. However, many taxpayers prefer having a tax attorney or CPA handle the negotiation to ensure expenses are categorized correctly.

6. Monitor Your Status Annually

Once approved, you must continue to file your taxes on time and avoid new balances to keep your CNC status active.

Just because you can’t afford to pay your tax bill doesn’t mean the IRS will automatically agree. The IRS has strict guidelines on what qualifies as "Currently Not Collectible" (CNC) status, and its definition of necessary living expenses is much narrower than what many taxpayers consider reasonable.

The agency sets standard allowances for food, clothing, housing, and other essential expenses based on location and household size. If your expenses exceed these predetermined amounts, the IRS typically won’t count the excess when evaluating your request for uncollectible status.

For example, if the IRS determines that your car allowance should be $662 per month, but you’re actually paying $700, they won’t consider the extra $38 as an allowable expense. Similarly, credit card payments and other non-essential costs are generally not factored in when the IRS reviews your financial situation.

The IRS offers a program that allows you to request that penalties be waived. This is called penalty abatement, which is the process of requesting and receiving forgiveness for specific penalties the IRS assesses.

Any taxpayer can request a penalty abatement, and those who have generally filed and paid on time can request a first-time abatement for the first year of payment or filing they missed.

All other penalty abatement requests vary, including the reasons for failure to file or pay and your previous tax record. To request it, you or your tax professional will:

• Specify the penalty you want the agency to abate.
• Explain the circumstances beyond your control that prevented you from timely filing and payment, such as a situation outside your control.
• Submit any evidence that supports your case.

The IRS will consider the facts and issue a determination. If the agency rules in your favor, they’ll reduce your balance by the penalty amount plus any interest assessed against it.