When a taxpayer is classified as “currently not collectible,” it means that the IRS has determined their financial situation to be such that they are unable to pay their tax debt. This status is granted when an individual’s monthly income falls below their necessary living expenses, leaving no disposable income to satisfy their tax liabilities. To determine CNC status, the IRS examines an individual’s income, assets, and expenses to assess their ability to pay.

To determine CNC status, the IRS evaluates an individual’s financial condition through a comprehensive review of their income, expenses, and assets. The IRS may request supporting documentation such as pay stubs, bank statements, and utility bills to verify the taxpayer’s financial situation. The goal is to establish whether the individual’s income is insufficient to meet their necessary living expenses, leaving no room for tax payments.

The IRS follows specific guidelines to determine what constitutes necessary living expenses. These guidelines include food, housing, transportation, healthcare, and other essential expenses. It’s important to note that discretionary expenses, such as luxury items or non-essential services, are not factored in when assessing CNC status.