Your Client Can’t Pay the IRS… but the IRS is Trying to Collect. Now what?

Currently Not Collectible status.

It sounds like a solution. It also feels like relief.

It's a bit of both.

But it’s also where a lot of cases can go sideways.

I’m going to walk through 5 things you need to understand when your client might qualify for CNC status.

1. CNC Doesn’t Solve the Problem but It Does Freeze It

When the IRS places a client into Currently Not Collectible status, collections stop.

No levies. No garnishments. No immediate pressure from the IRS.

But let's be clear, it's not forgiveness. And it's not a reduction (although it could mean one). It's a pause in enforcement.

The balance continues to grow. Interest keeps compounding. Penalties keep stacking.

You don't have to worry about levies or wage garnishments but you still owe the money. That’s not necessarily bad—but it is something you need to understand going in.

2. CNC is Based on IRS Math

Clients many times think CNC is about hardship in the emotional sense.

It’s not.

It's a formula, just like many of the outcomes when it comes to the IRS.

The IRS looks at income and compares it to “allowable” expenses. What’s left over is what the IRS believes should go to the tax debt. If there’s nothing left—or close to nothing—CNC becomes an option.

But it's not always so straightforward.

Those “allowable” expenses are not always what your client actually spends. They’re what the IRS says is reasonable, not what your client thinks is reasonable.

Which means when the IRS looks at your client's financials, they may say your client has disposable income even when it doesn't seem that way in real life.

3. Assets Matter

Cash flow is the main part of the story, but not the only part.

The IRS also looks at what your client owns, including savings accounts, home equity, and investments. Anything that can be liquidated.

You can have a client fighting to pay their bills who still get denied CNC because of equity in assets.

Not all equity is accessible, though and you have to prove to the IRS that it's not.

4. CNC Isn’t Permanent, Unless It is

There’s no set expiration date for CNC.

But it is periodically reviewed.

The IRS checks back. If your client’s income increases…if something changes…or if your client falls out of compliance, collections can restart.

It's only supposed to be a temporary status to allow taxpayers to get back on their feet, to protect them from hardship, and to give them some breathing room but it doesn't mean the debt is gone.

But there's nuance.

So you'd better understand this next point.

5. CNC Can Quietly Become the Best Long-term Strategy

Most people don't realize that CNC is not permanant.

They think it will fix everything.

And in certain cases, they're right.

It becomes the strategy.

The IRS has 10 years to collect. Once those 10 years are up, whatever's left is written off.

If a client remains in CNC long enough—because their financial situation never improves—the clock can run out. Whether that's on one balance or all of the balances.

But it doesn't happen for everybody...and only in certain cases. It should be used as a tool to make sure your client gets the best possible outcome.

For CNC to work strategically, though, you need a plan.

TL;DR

⏩ CNC stops collections, but it doesn’t eliminate the debt

⏩ The IRS decides eligibility based on strict financial formulas

⏩ Assets can disqualify clients even if cash flow is tight

⏩ The IRS periodically reviews and can restart collections

⏩ In some cases, CNC can outlast the collection statute

➥ Contact Attorney Stephen A. Weisberg for a free Tax Debt Analysis.

Contact Me Here: https://www.weisberg.tax/contact-1

Email: s.weisberg@weisberg.tax

Phone/Text: (248) 971-0885

Address: 300 Galleria Officentre, Suite 402, Southfield, MI 48034