CNC and the Ten-Year Collection Statute

Every IRS balance has an expiration date. Most taxpayers never learn theirs. For someone in CNC status, that date may be the single most important fact in the case, because CNC does not stop the clock.

The ten-year rule

IRC 6502(a)(1) says that when tax has been properly assessed, it "may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun... within 10 years after the assessment of the tax." The IRS calls the end of that period the Collection Statute Expiration Date, or CSED.

Each assessment has its own CSED. If you owe for five tax years, you may have five or more different expiration dates, and additional assessments within a year, such as an audit adjustment, can carry their own dates too.

CNC does not suspend the CSED

IRM 5.1.19 lists the transaction codes and case actions that suspend or extend a CSED. The list includes an offer in compromise pending, military deferment, IRS litigation, bankruptcy, a pending installment agreement, and extension waivers. CNC status, coded as transaction code 530, is not on the list of suspending events.

That means the ten years keep running while your account sits in CNC. A taxpayer who enters hardship CNC with four years left on the statute and stays there may reach the CSED without ever being returned to collection.

When the statute expires on an account that is in CNC, IRM 5.16.1.2.2.4 says closing code 05 is used "when the entire module balance expires after issuance." The balance is closed out.

What does suspend the clock

This is where people trip. Some of the most common things taxpayers do in a collection case pause the CSED. IRM 5.1.19 describes, among others:

• Offer in compromise. The CSED is suspended while an offer is pending. The campus CNC manual notes that IRC 6331(k)(1) "provides the authority to suspend the CSED while an Offer in Compromise is considered."
• Pending installment agreement. A pending installment agreement request is coded with its own transaction that suspends the CSED.
• Collection Due Process hearing. The CSED is suspended from the date the IRS receives a timely CDP request until the request is withdrawn or the Appeals determination becomes final, including court appeals, under IRC 6330(e)(1).
• Bankruptcy. The CSED is suspended while the IRS is prohibited from collecting, "and for six months thereafter," citing IRC 6503(h)(2).
• Military deferment and certain litigation.

IRM 5.1.19 also notes that overlapping suspensions "run concurrently; they are not cumulative." Two suspensions that cover the same months do not count twice.

Why this matters when choosing a resolution

Here's the part most people miss. The resolution you choose can change your CSED. CNC leaves the clock alone. An offer in compromise pauses it while pending. A CDP hearing pauses it while the hearing and any appeal run.

That does not mean you should avoid offers or hearings. An accepted offer ends the debt permanently. A CDP hearing may be the only way to stop a levy. It means you should know your CSEDs before you file anything, so you understand what each step costs in time.

For a taxpayer with a stable, permanent hardship, such as a retiree on a fixed income, and a CSED two or three years away, CNC may let the statute expire without additional suspension. For a taxpayer with a CSED eight years away and a reasonable chance of an accepted offer, the offer may be worth the pause. Compare them in CNC vs. installment agreement vs. offer.

What the IRS does near the end

The IRS watches statute dates. IRM 5.16.1.2.2.1 defines an imminent CSED module as one with "twelve months or less remaining on the collection statute." Revenue officers must discuss imminent CSED modules with their group manager and document a plan of action to resolve them before expiration "whenever circumstances permit."

In practice, an account approaching its CSED may get attention. If you are in true hardship, a review should confirm that, and the account can stay in CNC. If your situation improved, the IRS may try to collect before time runs out. Some balances are referred for a suit to reduce the tax to judgment, which under IRC 6502(a) extends the period if the proceeding is begun in time.

After expiration

Once a CSED passes, the IRS generally cannot collect that balance by levy. The levy regulation, 26 CFR 301.6343-1(b)(1), requires release of a levy when the collection period "has lapsed," with exceptions for a timely written extension or a timely court proceeding. And IRM 5.16.1.2.2.1 says employees should not solicit voluntary payments on accounts barred by statute.

Interest follows the tax. The CNC manual cites IRC 6601(g) for the rule that interest may be collected as long as the underlying tax can be collected. Some penalties carry their own CSED apart from the tax, so check each one.

How to find your CSED

Your CSED is not printed on most notices. A representative can compute it from your account transcripts by finding the assessment date for each tax and adding ten years, then adjusting for suspension events. The IRS can also tell you its computed CSED. When the IRS's date and your own calculation differ, find out why. Suspension periods are where the errors usually hide.

A worked timeline

Suppose a tax was assessed on June 1, 2019. Absent any suspension, the CSED is June 1, 2029. The taxpayer was placed in hardship CNC in 2024 and has stayed there. CNC itself added no time.

Now suppose that in 2022, before CNC, the taxpayer submitted an offer in compromise that was pending for eight months before it was rejected, plus the period IRM 5.1.19 adds after rejection for appeal rights. Those months are added to the CSED. And if the taxpayer had requested a CDP hearing in 2023 that ran for six months, those months are added too, unless they overlapped with the offer period, in which case they run concurrently and are not counted twice.

The result is a later CSED than the simple ten-year count, and the only way to know the real date is to walk through the account history period by period. That is why transcript review comes first in every hardship case I handle.

Multiple years, multiple clocks

Because each assessment has its own CSED, a taxpayer with several years of debt will see them expire one at a time. In a long CNC case, the oldest year may drop off while newer years remain. Each expiration reduces the balance, which can change the math on whether an offer or installment agreement makes sense for what remains.

IRM 5.16.1.2.2.1 adds a related rule: payments applied to a module with multiple CSEDs should be applied "in order of the date in which the CSED will expire, starting with the one that will expire first." Undesignated payments and levy proceeds tend to go to the oldest debt first.

A caution

Waiting out the statute is a legitimate outcome of a true hardship case. It is not a strategy to manufacture hardship. The hardship regulation requires good faith, and the IRS can reactivate an account when income rises. If you are in CNC because you genuinely cannot pay, the CSED is your friend. If you are hiding income, it is not going to save you.

Know your dates. They decide more cases than most people realize.