Blog · 15 October 2026

Currently Not Collectible Status and CDP Hearings: What Swain v. Commissioner Means for US CPA Firms

By Keshav Bansal, CA

In Swain v. Commissioner, T.C. Summary Opinion 2026-9 (filed September 24, 2026), the US Tax Court sustained an IRS levy after Appeals refused to place a California couple in Currently Not Collectible (CNC) status during a Collection Due Process (CDP) hearing. Even on the couple’s own expense figures, they had $46 a month left over—and Judge Guider held that was enough to show an ability to pay. For US CPA firms, it is a compact lesson in how CDP hearings, IRS expense standards, and CNC interact.

What happened in Swain

The Swains’ 2017–2019 returns each showed an underpayment. On August 16, 2021, the IRS issued Notice CP90 (Notice of Intent to Seize your Assets and your Right to a Hearing) showing a total balance due of $21,288.98 for 2017–19, including additions to tax and interest. The couple filed a timely Form 12153 dated September 12, 2021, checked the box saying they could not pay, and did not dispute the underlying liabilities.

Their Form 433-A listed seven people in the household: the couple, an adult son, an adult daughter-in-law, and three grandchildren. None had been claimed as dependents, so the settlement officer limited allowable expenses to a two-person family. She also disallowed claimed term life insurance premiums after asking twice, in writing, for “documentation to show the type of policy and who the insured is”—documents the couple never produced. The officer proposed installment agreements, including a partial payment agreement; the Swains rejected each and proposed nothing else. Appeals sustained the levy on December 19, 2023.

The Tax Court first denied the IRS’s summary judgment motion and, on July 1, 2025, remanded the case because the record showed liability discrepancies, unclear handling of collection expiration dates, and unexplained payment proposals. On remand, a new settlement officer explained the numbers and offered a fourth installment agreement at $1,357 per month, which was refused. Appeals again sustained the levy on January 14, 2026, and the court granted summary judgment for the IRS.

CDP hearings in brief: Form 12153 and the 30-day window

Under IRC §6330, the IRS must give notice of the hearing right at least 30 days before the first levy, and the taxpayer may request a hearing during that period. The IRS Appeals CDP FAQs point taxpayers holding Letter 1058 or LT11 (or, as in Swain, CP90) to Form 12153, and say Appeals will need a Form 433-A or 433-B to weigh collection alternatives. For liens, §6320 runs a parallel 30-day window.

A timely request matters. Section 6330(e)(1) suspends the levy actions that are the subject of the hearing, and the running of the §6502 collection period, while the hearing and appeals are pending. Form 12153’s instructions explain that a late request gets only an equivalent hearing (requested within one year of the levy notice), which does not stop levy, does not suspend the 10-year collection period, and cannot be taken to court. After a CDP determination, §6330(d)(1) gives 30 days to petition the Tax Court; the Swains’ petition, postmarked January 17, 2024, was timely by one day under the §7502 mailbox rule.

At the hearing, §6330(c)(2)(A) lets the taxpayer raise spousal defenses, the appropriateness of collection, and alternatives. The underlying liability is open only if there was no notice of deficiency or other prior opportunity to dispute it (see our Lindsey notice of deficiency article).

Currently Not Collectible status: what it is and what it is not

The IRS describes CNC as a temporary delay for financial hardship: most collection activity is suspended, but the full debt is still owed, penalties and interest keep accruing, a Notice of Federal Tax Lien may be filed, refunds are applied to the balance, and collection can resume if finances improve. There is no fixed duration.

The legal hook in Swain was §6343(a)(1)(D) and Treas. Reg. §301.6343-1(b)(4)(i): a levy must be released if it would leave an individual unable to pay reasonable basic living expenses, and a taxpayer released on those grounds is placed in CNC. Citing Foley, the court said CNC requires “no apparent ability to make payments.” A surplus of $46—or $62, as in the earlier Norberg case it cited—can still be applied to the debt.

IRS Collection Financial Standards and household size

The IRS Collection Financial Standards (current version effective June 29, 2026) allow national amounts for food, clothing, and other items by family size without questioning actual spending; local housing, utilities, and transportation standards are generally capped at the lesser of actual cost or the standard. The IRS page states that the number of people allowed should generally match the dependents on the taxpayer’s most recent return; deviations require documentation that the standards are inadequate.

That rule sank the Swains’ seven-person budget. The IRM allows “reasonable exceptions,” such as foster children, but the couple offered none. The court also noted that the IRM does not list a substantiation requirement for term life premiums, yet a reasonable documentation request that goes unanswered lets the officer decide without the expense.

Abuse of discretion: why the Tax Court rarely redoes the math

Where the underlying liability is not properly at issue, the Tax Court reviews the Appeals determination for abuse of discretion—whether it was “arbitrary, capricious, or without sound basis in fact or law.” Swain repeats that the court will not recalculate ability to pay and generally upholds officers who follow IRM guidance. Contrast de novo review of a liability dispute in our trust fund recovery penalty / Amodio article. Still, the first remand shows the IRS’s record must add up. Small-case CDP decisions like this one (available where unpaid tax does not exceed $50,000 under §7463(f)(2)) are non-precedential and cannot be appealed.

CPA checklist before a client asks for CNC

1. Calendar the CDP notice date. Get Form 12153 in within the 30-day window to preserve the levy stay and Tax Court review; keep proof of mailing.
2. Build the 433-A on IRS standards first. Price the household size the IRS will use—filers plus dependents on the most recent return—before arguing for more.
3. Document every deviation. If non-dependents rely on the client, gather evidence for an exception.
4. Substantiate “other necessary” expenses. For term life insurance, have the declarations page showing policy type and insured ready.
5. Treat any surplus as a payment plan signal. Model an installment agreement or offer in compromise rather than refusing every proposal, and remind clients that CNC does not stop interest—see our IRS collection alternatives guide.

Where Tax Brew fits

Collection cases turn on clean financial statements and expense support. Tax Brew supports US CPA firms with tax prep support, bookkeeping and cleanup so partners can focus on client strategy. See our services, or email info@taxbrewglobal.com.

Sources: Swain v. Commissioner, T.C. Summary Opinion 2026-9 (Docket No. 1986-24SL, filed Sept. 24, 2026); TaxCourtBlog summary (Oct. 7, 2026); IRC §§6320, 6330, 6343, 7463(f) (Cornell LII); Treas. Reg. §301.6343-1(b)(4)(i); IRS “Temporarily delay the collection process”; IRS Collection Financial Standards (effective June 29, 2026); IRS Appeals “Collection Due Process (CDP) FAQs”; Form 12153 (Rev. 7-2022). Summary opinions are not precedent. General information, not tax advice.