CNC Without a Financial Statement: Exception Processing

A collection information statement is a lot to ask of someone in a hospital bed, a prison cell, or a household living on a single benefit check. The IRS knows that. Both its field procedures and its campus procedures include a shortcut for a narrow set of hardship cases: CNC without a financial statement.

The field rule

IRM 5.16.1.2.9 says: "Under certain conditions, a CIS is not required before reporting an account CNC. The aggregate unpaid balance of assessments, including any prior CNCs, must be less than" a threshold amount, "and at least one of the following conditions must exist":

• "The taxpayer has a terminal illness or excessive medical bills."
• "The taxpayer is incarcerated."
• "The taxpayer's only source of income is Social Security, welfare, or unemployment."
• "The taxpayer is unemployed with no source of income." For seasonal workers, the IRM suggests considering a manually monitored installment agreement instead.

The dollar threshold is redacted in the public version of the IRM. I will not guess at it. If your balance is modest and one of these conditions applies, ask.

The campus rule

The campus and ACS version is IRM 5.19.17.2.4.1, CNC Exception Processing. It uses the same four conditions and a balance threshold, also redacted, computed from the aggregate assessed balance "including any prior CNCs" and "excluding any individual SRP balances." The account is closed with closing code 24.

The campus authority tables in IRM 5.19.13.2 confirm that for CNC exception processing, no financial analysis is needed, but the employee must "verify basis for Exception Processing (through internal or external sources, or verification from taxpayer)."

Proof is still required

No financial statement does not mean no proof. The field IRM adds a note: "Employees are required to secure documentation from the taxpayer prior to declaring the account uncollectible if internal documents such as IRPTR and RTVUE do not confirm the taxpayer's circumstance." Those are the IRS's internal information return and return transcript systems.

The campus IRM says employees "should confirm the taxpayer's circumstances to the extent possible prior to declaring the account uncollectible," through verbal communication with the taxpayer or internal resources, and document the case.

So bring something:

• Terminal illness or excessive medical bills: a physician's letter, hospice enrollment, or recent medical bills.
• Incarceration: the inmate number and facility. Form 433-A (Rev. 6-2026) itself asks on line 9a whether you are currently incarcerated and requests the inmate number.
• Social Security, welfare or unemployment only: the benefit award letter or recent statements. The IRS can often confirm Social Security income internally.
• Unemployed with no income: the separation notice and anything showing you have no current income.

Who can request it on your behalf

A spouse, adult child, or other family member cannot discuss your account without authorization. If the taxpayer is incapacitated or incarcerated, a representative with a valid power of attorney on Form 2848 is the cleanest path. For a deceased taxpayer, different CNC rules apply under the decedent procedures.

What exception processing does not do

It is still CNC. Interest and penalties continue. The ten-year collection statute keeps running. Refunds can be offset. And it can be reactivated: closing code 24 carries a $20,000 value, so a filed return showing total positive income above that amount can trigger systemic reactivation. For a taxpayer whose only income is Social Security, that may never happen. For an unemployed worker who finds a job, it likely will.

Levy release and compliance

This is where exception cases intersect with the Tax Court's decision in Vinatieri v. Commissioner, 133 T.C. 392 (2009). The taxpayer there had a terminal illness and a small balance, and the settlement officer noted she met the CNC hardship criteria. The court held that the IRS could not proceed with a levy that section 6343 would require it to release, even though she had unfiled returns.

The campus IRM now says, in the exception processing section, that there is "no requirement that taxpayers who are closed under the exception criteria and experiencing economic hardship be in filing or payment compliance before a levy is released," citing Vinatieri. If a levy on wages is creating a hardship, the IRM directs employees to the levy release procedures.

Liens in exception cases

The campus procedures in IRM 5.19.17 say that "In general, a NFTL determination is not required when closing an account with a CNC based on Exception criteria." That is a meaningful difference from regular CNC closures, where a lien is generally filed when the balance is $10,000 or more.

Incarcerated taxpayers

IRM 5.19.17.2.5 says incarcerated taxpayers "are afforded the same rights as other taxpayers; processing these accounts is also the same." For a joint liability or a partnership, the IRS will check whether a spouse or partner has the ability to pay. Incarceration of one spouse does not make a joint balance uncollectible from the other.

The field IRM's own example in IRM 5.16.1.6: a taxpayer who is incarcerated with a release date two years away, whose allowable expenses exceed income with no equity, is reported CNC using code 24.

Confirmation

When an exception closure is approved, the campus IRM says the taxpayer or representative must be informed of the CNC terms through Letter 4624-C. Keep it.

Managerial approval

Exception cases are usually small, and the IRM reflects that. Under IRM 5.16.1.5, hardship and certain other CNC closures with an aggregate unpaid balance below a redacted threshold "do not require managerial approval." In the campus, exception closures follow the authority levels in IRM 5.19.17.2.1. Either way, a modest balance with a documented exception condition is designed to move quickly.

Excessive medical bills: how much is excessive?

The IRM does not define "excessive medical bills" with a number. That leaves room for judgment, which cuts both ways. A taxpayer whose medical costs consume most of a modest income has a strong argument. A taxpayer with one large hospital bill and otherwise stable finances has a weaker one. If you are relying on this condition, show the bills, show what you pay each month, and show how those costs compare with your income. The out-of-pocket health care standard, $90 per person under 65 and $163 at 65 or older under the June 29, 2026 figures, gives a useful reference point for what the IRS considers ordinary.

Social Security as the only income

The benefits-only condition is the most common fit for older taxpayers. It requires that Social Security, welfare or unemployment be the only source of income. A small pension, rental income, or part-time wages take you out of this category, and into the regular CNC process with a financial statement. That is not a disqualification from CNC. It just means more paperwork.

When exception processing does not fit

If your balance is above the threshold, or your situation does not match one of the four conditions, you are in the regular CNC process with a full financial statement. That is not bad news. It simply means you need to build the case with Form 433-F or Form 433-A and documentation.

One more point. Exception processing does not lower the bar for honesty. If the IRS later learns that a taxpayer closed under the benefits-only condition also had wages or rental income, the account can be reopened, and the credibility of anything else the taxpayer says goes with it. Report the facts as they are.

Exception processing exists because some situations are obvious. If yours is one of them, make it easy for the IRS to see it, and ask for the shortcut by name.