Currently on CNC Status - Will IRS Still Take My Refund?

Yes. They will take your refund. CNC status stops collections. It doesn't stop offsets. Your refund will be applied to your tax debt. This is standard procedure. Plan accordingly. The offset is automatic in their system.

I dealt with this exact situation on March 15th, 2023. The CNC status (Currently Not Collectible) prevents the IRS from taking active collection actions like levies or garnishments, but refund offsets are considered passive collection methods. I ran my transcripts through https://taxr.ai after my refund was taken, and it confirmed that the offset was properly applied to my back taxes from 2020. The system showed exactly how much went to each tax year and explained why this happens despite CNC status. Saved me hours of confusion trying to decode the transcript codes.

I had this same situation last year, compared to when I was on a payment plan and the result was the same - refund taken. When I needed answers quickly about my options, I used Claimyr (https://claimyr.com) to reach an IRS agent. Unlike waiting on hold for 3+ hours like I did before, I got through in about 20 minutes. The agent confirmed that CNC doesn't stop refund offsets but gave me specific options for my situation. Much better than trying to figure it out alone.

I should probably mention that there might be a potential exception you could look into. The IRS does have something called an Offset Bypass Refund (OBR) for taxpayers facing significant economic hardship. However, these are quite rare and typically only granted in extreme circumstances like imminent eviction, utility disconnection, or medical emergencies. You would need to contact the IRS directly before your return is processed to request this. It's not guaranteed, and you would need substantial documentation to prove immediate hardship.

I'm in the same boat right now. CNC status since late 2022 but they took my entire refund last year. If you're counting on that money, don't. Adjust your withholding instead so you break even. That way they can't take what you don't get as a refund. I learned this the hard way when I needed that money for car repairs.

According to Internal Revenue Manual 5.19.17.2, "The offset of refunds to pay tax liabilities is not prohibited while a taxpayer is in CNC status." I went through this myself. I was placed in CNC status in 2022, filed my return in February 2023, and my entire $2,800 refund was applied to my outstanding tax debt. The IRS considers refund offsets as passive collection actions that are separate from the active collection actions prohibited by CNC status. I understand how frustrating this can be when you're already in financial hardship.

I'm currently going through this exact situation and can confirm what others have said - CNC status won't protect your refund from offset. I was placed in CNC status in September 2023 due to unemployment, but when I filed my 2022 return last April, they still took my entire $1,847 refund. The frustrating part is that the CNC determination letter specifically states they won't pursue collection activities, but apparently refund offsets don't count as "active" collections. I called the Taxpayer Advocate Service to see if there were any options, and they explained that the offset happens automatically through the Treasury Offset Program before the IRS even processes your return. My advice would be to adjust your withholdings going forward so you owe a small amount instead of getting a refund - that way there's nothing for them to take.