CTRS Currently Not Collectible Status and Financial Hardship

Question 1

What does 'Currently Not Collectible' (CNC) status mean for a taxpayer with an outstanding IRS debt?

Accepted Answer

The IRS temporarily suspends active collection actions because the taxpayer cannot pay without suffering financial hardship

Answer

The tax debt is permanently forgiven and removed from IRS records

Answer

The taxpayer is placed on an installment agreement with zero monthly payments

Answer

The IRS files a Notice of Federal Tax Lien and waits for the taxpayer's financial situation to improve

Question 2

Which IRS Collection Information Statement is used for wage earners and self-employed individuals when requesting Currently Not Collectible status?

Accepted Answer

Form 433-A

Answer

Form 656

Answer

Form 9465

Answer

Form 12153

Question 3

What happens to the 10-year Collection Statute Expiration Date (CSED) while a taxpayer is in Currently Not Collectible status?

Accepted Answer

The CSED continues to run normally during CNC status

Answer

The CSED is extended by the length of time the account is in CNC status

Answer

The CSED is permanently tolled until the taxpayer's income increases

Answer

The CSED resets to a new 10-year period when CNC status is granted

Question 4

What is the primary IRS standard used to evaluate allowable living expenses when determining a taxpayer's eligibility for Currently Not Collectible status?

Accepted Answer

The National and Local Financial Standards published by the IRS

Answer

The Federal Poverty Guidelines published annually by HHS

Answer

The Consumer Price Index for urban wage earners

Answer

The taxpayer's actual documented expenses without limitation

Question 5

Which of the following best describes what occurs to tax refunds while a taxpayer is in Currently Not Collectible status?

Accepted Answer

Refunds are applied to the outstanding tax debt through the Treasury Offset Program

Answer

Refunds are issued in full to the taxpayer since collection is suspended

Answer

Refunds are held in escrow by the IRS until CNC status is lifted

Answer

Refunds are split equally between the taxpayer and the outstanding balance

Question 6

A taxpayer's gross monthly income is $2,800 and their IRS-allowed monthly expenses total $3,100. Which collection resolution option does this scenario most directly support?

Accepted Answer

Currently Not Collectible status

Answer

Installment Agreement — Partial Pay

Answer

Offer in Compromise — Doubt as to Collectibility

Answer

Penalty Abatement — First Time Abatement

Question 7

Under which Internal Revenue Code section does the IRS derive authority to suspend collection actions based on a taxpayer's financial hardship?

Accepted Answer

IRC Section 6343

Answer

IRC Section 6331

Answer

IRC Section 7122

Answer

IRC Section 6159