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Pros and Cons of Currently Not Collectible (CNC) Status

Written by Jacob Merkley on September 24, 2020

During the payroll tax debt resolution process, the financial analysis might show that you have severe financial hardship within your construction or trade business.

I don’t see it very often. Most business that have severe financial hardship are also on the border of bankruptcy.

Yet, if you are:

  1. In financial hardship
  2. Able to continue on as a business
  3. And lack the money to pay off your IRS payroll tax debt

…then you likely qualify for Currently Not Collectible Status. Ultimiately, if there are no assets to liquidate, and no income above business expenses, then you probably qualify.

Currently Not Collectible Status is one of about seven different tax resolution options for your payroll tax debt.

Pros of CNC Status

There are many pros of qualifying for CNC status, namely:

  • All collection activities from the IRS will stop. This includes levies and seizures of business assets or property.
  • That pesky IRS Revenue Officer will stop making unannounced stops at your place of work.
  • The CSED clock keeps running. The Collection Statute Expiration Date (CSED) is the last date for the IRs to collect from you. When that date occurs…
  • Your tax liability disappears and the business won’t owe a dime to the IRS.

Cons of CNC Status

While all of those advantages seem awesome (and they are), there are still a few disadvantages of being placed in CNC status.

  • The IRS will file a tax lien against the business. If you go out of business, the IRS wants first dibs on liquidating final assets.
  • There will be a mandatory financial analysis review every 18-24 months to see if you qualify for CNC status still (rarely happens).
  • The Trust Fund Recovery Penalty assessment will be filed against someone (or multiple people) in the business.
  • Interest and penalties still accrue while in CNC Status. Should you no longer qualify, the debt, interest, and penalties will become due.

If you are in tax debt, and not sure which option is best for you, take advantage of our free Discover Your Options™ strategy session. We’ll review your unique case, talk through the resolution process, and then you’ll put us to work to find the exact resolution option that is right for your situation.


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