Currently Not Collectible Status
There can be situations when a taxpayer owes taxes to the IRS, but can’t afford to pay because of their current financial situation. If this is you and if the IRS agrees that you can’t both pay your taxes and also your reasonable living expenses, you may qualify for the Currently Not Collectible status.
While your account is in CNC status, the IRS generally won’t try to collect from you. For example, they won’t levy your assets and income.
Important note: Reasonable living expenses is the operative phrase here. If you present your financials incorrectly or have not fixed some disqualifying expenses prior to submitting financials to the IRS, you can find yourself making your situation worse rather than qualifiying for Currently not Collectible status.
The taxes do not go away, however, unless you run the statute of limitations, and until then the IRS will still assess interest and penalties to your account, and may keep your refunds and apply them to your liability. You’ll also continue to receive an annual bill from the IRS because that is required under the law.
Before the IRS will place your account in CNC status, it may ask you to file any past due tax returns. If you request CNC status, the IRS may ask you to provide financial information, including your income and expenses, and whether you can sell any assets or get a loan.
Generally, the IRS can attempt to collect your taxes up to ten years from the date they were assessed, though the ten-year period is suspended in certain circumstances. The time the suspension is in effect will extend the time the IRS has to collect the tax.