Taxpayers often raise questions about how Currently Not Collectible Status works. How do I qualify? How long does it last? Will my tax debts expire at some point if I am in CNC status? As with most IRS issues, the answers are not entirely black and white.
A taxpayer qualifies for CNC status when the taxpayer’s reasonable expenses exceed or equal the taxpayer’s income, and when the taxpayer does not hold excessive saleable assets. The IRS provides maximum allowable expenses for taxpayers based on family size, the county of residence, and several other factors.
The Service will not put a taxpayer into CNC where a multi-million dollar
home is draining most of the taxpayer’s income. Moreover, the IRS
will not put an unemployed taxpayer who holds a multi-million dollar trust
fund into CNC status. Generally speaking, however, most families of four
with a $50,000 salary and reasonable assets will qualify.
The duration of CNC status is no more certain. Like many government agencies, the IRS runs on its own time. Once in CNC status, a taxpayer should remain there for two years. This is rarely the case. The IRS will frequently leave taxpayers in CNC for many years; mainly flagging taxpayer’s cases for review once there is a 25% increase in reported income.
Barring certain events, IRS tax debt expires after ten years. Please see our article on the Statute of Limitations: LINK. While in CNC status, this time continues to run. Often, as long as the taxpayer does not declare bankruptcy, the taxes will expire during or a few years after the expiration of CNC.