Offer in Compromise or Currently not Collectible?

Failure to meet your annual tax obligation is an invitation to severe financial and legal consequences. The IRS can impose legal penalties, delay reimbursement, and in worst-cases, seize your possessions and put you behind bars. There is no escape from filing and paying your taxes, but the IRS provides a few avenues to help those who are unable to make payments due to financial difficulties. An Offer in Compromise settlement and Currently not Collectible status are two solutions available to help taxpayers who meet the IRS’s financial hardship criteria. Both options, however, have their pros and cons, which you need to be aware of to make an informed decision on which avenue to pursue to resolve your tax issues. To help you decide, we discuss the details in the blog post.

Offer in Compromise

An IRS settlement through the Offer In Compromise program lets the taxpayer settle the entire debt by paying an amount that is less than what is actually owed to the IRS. Certain criteria must be met, then if the IRS agrees to an Offer in Compromise (OIC), the taxpayer should make sure to file their income tax returns on time and pay the tax in full for the next five years.

Offer in Compromise Advantages

An Offer in Compromise (OIC) removes a Federal tax lien against the taxpayer.
As the income tax debt goes away, you earn more money by not having to pay back taxes.
The IRS settlement can be paid in installments.

Offer in Compromise Disadvantages

You have to pay $186 as a filing fee to process the request.
There is a possibility of the IRS rejecting the request.
You have to be perfectly tax compliant for five years, once the Offer in Compromise (OIC) request is accepted.
You must owe $10,000 or more to take advantage of the Offer in Compromise program.
Currently not Collectible status

If you are unable to pay your income tax debt, the IRS may consider your eligibility for Currently Not Collectible Status. The IRS will cease all collection activities, which includes levies and garnishments, until the IRS notices an improvement in your financial condition. The IRS will send a statement that includes detailed information of the income tax debt to the taxpayer every year the account is in CNC (Currently Not Collectible) status. If the taxpayer is not able to pay the amount, the IRS will keep postponing the collection.

Currently not Collectible Advantages

You don’t have to pay any amount to the IRS
You don’t’ have to worry about tax levies and garnishments
The Statute of Limitations continues to run and it may run out on your income tax debt.
Currently not Collectible status is your only choice if you owe less than $10,000.

Currently not Collectible Disadvantages

Despite the your Currently not Collectible (CNC) status, you still owe the IRS and a Federal tax lien, nost likely, will be filed
If you do not file a tax return, there is a probability of cancellation of the uncollectible status
Dramatic increase in income can also lead to cancellation of the status
Making a Decision

If you cannot pay your past due income tax debt, it's always better to settle the entire income tax debt. Don't run half the race. Finish the race and get yourself a Fresh Start.


keep in touch

Flat Fee Tax Service

3200 4th Ave., Suite 208,

San Diego, CA 92103

Phone. 800-589-3078