What's the Difference Between a Payment Plan and Currently Not Collectible Status?

If you owe the IRS money you can't afford to pay, a payment plan and currently not collectible (CNC) status are two different ways the IRS handles your account. An installment agreement is a formal payment plan where you pay a fixed monthly amount until the debt is paid off, plus ongoing interest and penalties — this works well if you have some cash flow but can't pay everything at once. Currently not collectible status is a temporary classification the IRS grants when it determines that collecting from you would cause financial hardship — your necessary living expenses equal or exceed your income. Under CNC status, the IRS puts collection action on pause and doesn't require monthly payments, but interest and penalties continue to accrue and the debt doesn't go away. The IRS periodically reviews your finances while you're in CNC status, and if your situation improves, they may require you to start making payments.