Qualifying for Currently Not Collectible Status Stops the IRS Harassment

What “Not Collectible Status” Can Do for You

Sometimes taxpayers find themselves in a position where they owe back taxes to the IRS or the state of Michigan, but cannot afford to pay any taxes at all and still meet their basic living expenses. For these taxpayers, seeking “currently not collectible” (CNC) status is an option. The operative word here is “currently.” If the IRS (or the state) approves your request, the debt does not go away but is be put on hold until such time you are able to pay.

If you qualify for CNC status, the IRS and state of Michigan remove your account from collections and gives you temporary relief from collection actions and frees you from obligations to make current payments. However, if you are granted CNC status, your tax refunds will still be garnished and the IRS may still file a Notice of Federal Tax Lien. Penalties and interest continue to mount until the debt is paid in full.

How the IRS Determines Not Collectible Status

The IRS and the state of Michigan do not want to waste their time trying to squeeze blood from a turnip. If you can show that your average monthly living expenses are greater than your average monthly income, you could qualify for currently not collectible status. Before the IRS approves your request, they will ask you to complete a Collection Information Statement (Form 433-F Form 433-A or Form 433-B) and provide proof of your financial status, which will include a list of your assets, your income and your living expenses. The IRS will periodically review your financial situation, and once it improves, the IRS will expect payment.