Currently Not Collectible (CNC)

Situation

In June 2024, a client reached out for help resolving outstanding federal tax liabilities from prior years. The client owed $48K for tax year 2020 and $83K for tax year 2021, debts that had accumulated during the period when he owned a restaurant and could not keep up with required tax payments.

The IRS had already filed a lien against his property. Before contacting me, he had submitted an Offer in Compromise (OIC) through a local accountant, but the IRS rejected that offer in December 2023.

Challenge

Two issues defined this case.

The first was the rejected Offer in Compromise. Since an OIC had already been formally denied, that option was no longer available, which meant we needed to consider the remaining alternatives permitted under IRS rules.

The second challenge was the customer’s financial reality. His only income was Social Security, and his monthly expenses exceeded that amount. With the lien already in place, it was important to secure a resolution before the IRS escalated collection efforts through wage or bank account levies.

Approach

• Reviewed IRS account information and confirmed the prior OIC denial.
• Created and documented the financial statements required by the IRS, showing social security as the sole income source.
• Analyzed available avenues under IRS regulations, focusing on a Partial Pay Installment Agreement or a Currently Not Collectible (CNC) status, as these were the only remaining viable options.
• Determined that a CNC was the most appropriate solution given the customer’s income-to-expense imbalance.
• Submitted the completed financial statement to the IRS for review.
  
  

Results

• Secured Currently No Collectible agreement within one week of submitting the financial statement.
• Stopped all IRS enforced collection actions unless the customer’s financial situation improves. IRS lien remains in place until the liabilities are satisfied or the 10-year collection statute expires.
• Based on the customer’s expected long-term financial condition, this resolution effectively saved approximately $131K in taxes owed to the IRS.