Currently Not Collectible Status vs Offer in Compromise
When to pause collections with CNC vs settle your debt with an OIC.
What is CNC?
Currently Not Collectible (CNC) status temporarily pauses IRS collection activity. The IRS recognizes you cannot pay now and stops collection efforts. Your debt remains, interest accrues, and collection can resume if your financial situation improves.
What is OIC?
An Offer in Compromise (OIC) permanently settles your debt for a reduced amount. You make one or more payments to settle the full account. OIC ends your obligation; CNC only pauses it.
Choose CNC If
Choose CNC if: (1) You have no income or minimal income, (2) Your debt is larger than your future ability to pay, (3) You need breathing room during hardship, (4) You expect your situation to improve. CNC is temporary and can last months or years.
Choose OIC If
Choose OIC if: (1) You have assets you can liquidate, (2) Your reasonable collection potential is provably much lower than your debt, (3) You want permanent resolution, (4) You can make lump-sum or short-term payments.
CNC Financial Requirements
CNC requires proving your monthly expenses equal or exceed your income. The IRS uses standard expense allowances. Your debt must exceed what you could realistically pay over your statute of limitations period.
OIC Financial Requirements
OIC requires detailed documentation of income, expenses, and assets. You submit Form 433-A (individual) or 433-B (business). The IRS calculates your Reasonable Collection Potential from equity in assets plus future income capacity.
Interest and Penalties During CNC
Interest and penalties continue to accrue while under CNC status. Your debt grows over time. The IRS may file a Notice of Federal Tax Lien. Your credit report shows collection account status.
Interest and Penalties After OIC
Once OIC is accepted and paid, your debt is permanently discharged at the settled amount. No additional interest or penalties accrue. Your credit report shows account settled.
Frequently Asked Questions
How long does CNC status last?
Typically 2-5 years, depending on your circumstances. The IRS reviews your case annually. If your situation improves, CNC status ends and collection resumes.
Can CNC be converted to OIC?
Yes. If your financial situation improves while under CNC, you can apply for an OIC.
Does CNC stop wage garnishment?
Temporarily, yes. Existing garnishments are typically released upon CNC approval, but can resume if CNC ends.
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