In the event the IRS cannot collect a taxpayer’s back tax debt by full payment, through an Installment Agreement or by way of an Offer in Compromise, they will place a taxpayer’s account on a Currently Not Collectible (CNC) status. When an account is placed on a Currently Not Collectible status, the IRS stops its pursuit of collection activities against the taxpayer. There are statutes of limitation associated with all tax debt and the clock on these statutes of limitations on the tax debt will continue to run while in the CNC status. Barring any changes to the taxpayer’s financial situation, the status will remain in CNC until the liabilities expire. On another note, should the taxpayer’s situation improve with time, CNC status will be removed allowing the IRS to make every attempt to collect the liability. They will do this via full payment or an Installment Agreement.
Even when a taxpayer does not have a positive cash flow but has available equity in any assets that the taxpayer is fully dependent upon, the taxpayer may attempt to resolve their liability. How? By having their liability placed on a Currently Not Collectible status. The determining factor of this CNC status is the underlying circumstance surrounding the fact that liquidation of any asset(s) is not feasible or would cause a taxpayer significant financial hardship.