IRS LT38 Notice Help
If you received IRS LT38, your account is currently in Currently Not Collectible (CNC) status — but the IRS is reminding you the balance hasn’t disappeared. This is a low-urgency notice, but understanding what it means and what your options are is critical to protecting yourself long-term.
What the LT38 Notice Means
The IRS places accounts in Currently Not Collectible status when they determine you cannot currently afford to pay your tax debt without suffering financial hardship. CNC status temporarily halts IRS collection activity — no levies, no garnishments, no seizures.
The LT38 is simply a periodic reminder that your balance is still owed and continues to accrue interest and penalties. The IRS reviews CNC cases periodically and can remove the status if your financial situation improves.
Key Facts About CNC Status and LT38
- Your debt is still accruing interest and penalties even in CNC status
- The IRS 10-year collection statute (CSED) continues to run — the clock is ticking on how long they can collect
- The IRS reviews CNC accounts annually and may resume collection if your income increases
- You are not required to respond to an LT38 — no immediate action is required
- Future tax refunds may still be applied to the outstanding balance
Your Options After Receiving LT38
1. Maintain CNC Status
If your finances haven’t changed, you may be able to remain in CNC status. An Enrolled Agent can review your current income and expenses to determine if you still qualify and help you prepare if the IRS requests a financial review.
2. Set Up an Installment Agreement
If your financial situation has improved, an installment agreement can help you pay down the balance at a manageable monthly rate while stopping interest and penalty accumulation on future payments.
3. Explore an Offer in Compromise (OIC)
If you will never realistically be able to pay the full balance, an Offer in Compromise may allow you to settle for less than you owe. The CSED timeline can significantly affect OIC strategy.
4. Wait for the Collection Statute to Expire
In some cases — particularly for older debts close to the 10-year CSED — it may make strategic sense to monitor the account and wait for the collection period to expire. This strategy requires careful analysis and is not right for everyone.
Why You Shouldn’t Ignore It Entirely
While LT38 carries no immediate threat, ignoring your tax situation entirely can have consequences:
- Continued interest and penalties increase your total liability
- A change in income could prompt the IRS to remove CNC status without notice
- Unfiled future returns can jeopardize your CNC status
- Tax refunds will be automatically offset against your balance