Legal & Collection Transaction Codes

Collection transaction codes indicate whether an account is undergoing active collection, has been suspended due to hardship, or is subject to judicial/court proceedings.

Code Summary Table

TC	Name / Description	What It Means	Release Code
520	Legal / Court condition	Litigation, bankruptcy, CDP hearing, or summons.	TC 521
530	Currently Not Collectible	Hardship status; levies and automated billing halted.	TC 531
540	Collection status action	Internal assignment to ACS or Field Collection.	Varies
550	Collection activity	Extended collection monitoring or third-party notice.	Varies
560	Statute-related transaction	System/manual update affecting Master File ASED.	System

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TC 520 & 521: Legal / Litigation Condition

• TC 520:
  • Imposes a -V freeze on the module.
  • Automatically stops enforcement action if the taxpayer is in bankruptcy (automatic stay under 11 U.S.C. § 362) or has filed a timely Collection Due Process (CDP) appeal.
  • Do NOT interpret TC 520 in isolation: Look at the closing code / sub-code to see if it is bankruptcy, district court litigation, or Tax Court.
• TC 521:
  • Reverses or releases the TC 520 condition when the court proceeding, bankruptcy discharge, or appeal concludes.

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TC 530 & 531: Currently Not Collectible (CNC)

• TC 530:
  • Signifies that the taxpayer has proven financial hardship where paying tax would leave them unable to meet basic reasonable living expenses.
  • Halts active enforcement (no new levies or seizures).
  • Penalties and interest continue to accrue, and the IRS will still offset any future tax refunds toward the balance.
  • CSED clock generally continues to run unless another tolling condition exists.
• TC 531:
  • Removes the CNC status (e.g., taxpayer income increased on a subsequent W-2/1040, or mandatory periodic review triggered reactivation).

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TC 560: Statute-Related Transaction

• Documented in IRM 3.12.37 (IMF General Instructions).
• Controls or updates the Master File Assessment Statute Expiration Date (ASED).
• Essential when reviewing modules with statute extensions or waivers.