Sometimes you know you owe tax to the IRS. Even though you know you owe the amounts your financial situation puts you in a position where you just cannot pay the amounts owed. One option you have available in this situation is referred to as currently not collectible status or CNC.

If you can prove to the IRS that you cannot pay both your basic living expenses and your amounts owed they will grant CNC status. While your account is in CNC status the IRS will put all collection activity on hold. They will retain all refunds you would be entitled to and apply those amounts to your unpaid taxes.

So, sounds great right? What’s the catch? Interest will continue to accrue on your account. That means the amount owed will increase every month. The IRS will also be watching your returns and waiting to remove you from CNC status in the event you report higher income on your returns. The IRS generally has ten years to collect any amounts owed, when you are placed in CNC status this statute of limitations is paused giving the IRS more time to collect in the event you are no longer CNC.