What If You Owe the IRS but Can’t Afford to Pay?
- Reese Williamson
- 3 hours ago
- 5 min read
Understanding Currently Not Collectible status and other IRS collection options
Owing money to the IRS is stressful enough. Owing more than you can realistically afford to pay can make it difficult to know what to do next—especially when collection notices begin arriving.
The important thing to know is that not every unpaid IRS balance leads immediately to a levy or seizure. If paying the tax debt would prevent you from covering necessary living expenses, the IRS may temporarily pause most collection activity.
This is known as Currently Not Collectible status, or CNC.
CNC does not erase what you owe. It is also not a settlement or a payment plan. Instead, it is a determination by the IRS that attempting to collect the debt right now would create economic hardship.
For taxpayers who truly cannot afford to make payments, that temporary pause can provide valuable time to stabilize their finances and evaluate what should happen next.
What does Currently Not Collectible status actually do?
When the IRS places an account into hardship CNC status, it generally suspends active collection efforts while the status remains in effect.
That can mean the IRS stops pursuing actions such as bank levies, wage levies, and other active attempts to seize assets.
But there is an important distinction: CNC pauses collection activity. It does not make the tax debt disappear.
The IRS generally has a limited period of time to collect an assessed tax debt, commonly referred to as the Collection Statute Expiration Date, or CSED. In many cases, that collection period is ten years from the date of assessment, although certain events can suspend or extend it.
That timeline can be very important when deciding whether CNC status makes sense compared with other collection options.
What CNC status does not do
This is where people often misunderstand the program.
Even if the IRS agrees that your account is Currently Not Collectible:
The tax debt remains.
Interest and penalties generally continue to accrue.
The IRS may still file a Notice of Federal Tax Lien.
Future federal tax refunds may still be applied to the outstanding balance.
The IRS may review your financial situation later.
If your income or assets improve, collection activity may resume.
You still need to remain current with future tax returns and tax obligations.
In other words, CNC is a pause, not a clean slate.
That pause may be extremely helpful, but it is usually best viewed as one part of a broader strategy rather than the end of the process.
How does the IRS decide whether you qualify?
There is no single income number that automatically qualifies—or disqualifies—someone for Currently Not Collectible status.
Instead, the IRS generally looks at your overall financial situation, including:
Income
Necessary living expenses
Housing and utilities
Medical expenses
Insurance
Support obligations
Bank accounts
Real estate
Retirement accounts
Business interests
Other assets and debts
The central question is essentially:
After paying necessary living expenses, is there realistically money available to pay the IRS?
The IRS may ask you to complete a financial statement such as Form 433-F, Form 433-A, or Form 433-B, depending on the circumstances.
Supporting documentation can include recent pay information, bank statements, housing expenses, utility bills, insurance records, medical expenses, and information about assets and debts.
For Louisiana taxpayers, the analysis can become more complicated when there are issues involving a closely held business, jointly owned property, community property, or other significant assets.
Do you have to file all of your tax returns first?
Usually, compliance is an important part of getting the IRS to consider a collection alternative.
If required tax returns have not been filed, that may need to be addressed before the IRS will place an account into hardship CNC status.
And CNC does not excuse future compliance. If you fall behind again on later tax obligations, the IRS may return the account to active collection.
Is CNC the only option if you cannot pay the IRS?
No.
Currently Not Collectible status is only one of several possible IRS collection alternatives.
Installment agreement
If you cannot pay the balance in full but can afford a monthly payment, an installment agreement may be more appropriate.
Depending on the amount owed and other factors, some installment agreements can be established without providing a detailed financial statement.
Partial-pay installment agreement
Some taxpayers can afford to make payments, but not enough to fully satisfy the balance before the IRS's collection period expires.
In that situation, a partial-pay installment agreement may be available.
Offer in Compromise
An Offer in Compromise is different from CNC because it may allow a taxpayer to settle an IRS debt for less than the full amount owed.
The IRS generally evaluates factors such as the value of assets and the taxpayer's anticipated ability to pay.
Someone who qualifies for CNC may sometimes also be a candidate for an Offer in Compromise, but the two programs serve different purposes and have different requirements.
Collection Due Process
Certain IRS lien and levy notices provide the right to request a Collection Due Process hearing.
During that process, a taxpayer may be able to propose collection alternatives such as CNC status, an installment agreement, or an Offer in Compromise.
These notices can carry important deadlines, so they should not be ignored.
What about a tax lien?
A tax lien and a tax levy are not the same thing.
A lien is the government's legal claim against your property because of an unpaid tax debt. A levy is an actual collection action against property, such as money in a bank account or wages.
Even while an account is in Currently Not Collectible status, the IRS may still file a Notice of Federal Tax Lien to protect its interest.
That distinction is one reason it is important to understand exactly what kind of IRS notice you have received rather than assuming all collection notices mean the same thing.
Can Currently Not Collectible status help if a levy has already started?
Potentially.
Economic hardship can be a basis for seeking release of a levy. But by the time money has been removed from a bank account or wages have been affected, the disruption has already occurred.
That is why it can be better to evaluate collection options before a levy happens.
If you have received an IRS notice with a deadline—particularly a notice providing appeal or Collection Due Process rights—that deadline should be taken seriously even if you are also considering CNC status.
What should you do if you simply cannot afford to pay?
The answer depends on more than just the amount you owe.
A useful analysis generally considers:
How much time remains for the IRS to collect
Your monthly income and necessary expenses
Equity in your assets
Whether your financial situation is likely to improve
Whether you can remain current with future taxes
Whether another option, such as an installment agreement or Offer in Compromise, may provide a better long-term result
For someone experiencing genuine financial hardship, Currently Not Collectible status may be the appropriate first step. But it is usually worth considering the entire collection picture rather than looking at CNC in isolation.
Need help with an IRS collection problem?
Weiler & Rees represents individuals, businesses, estates, and trusts in IRS and Louisiana tax matters, including audits, collections, liens, levies, and other tax controversies. If you have received an IRS collection notice or cannot afford to pay an outstanding tax balance, contact the firm to discuss your situation.
This article is provided for general informational purposes only and does not constitute legal or tax advice. IRS collection procedures and available options depend on the facts of each matter.
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