IRS OIC vs CNC tax relief programs
Two of the top tax relief programs that the IRS has to offer is the IRS offer in compromise (OIC), and the other one is the currently not collectible status ( CNC). I will be comparing both of these programs side by side. Which IRS Tax Relief Program is better?
TLDR;
IRS OIC & CNC are the 2 top financial hardship tax debt settlement programs.
IRS Offer In Compromise is a front-end Settlement Program, while the CNC Program is a back-end settlement program.
4 Factors in Deciding the better option include Length of IRS approval time, IRS Forms required, the 10-year rule & aftercare once approved.
The IRS Program & the CNC Status both are finance-based tax relief programs that settle out your tax debt. The OIC s a front-end tax settlement while the CNC status is considered a back-end settlement tax relief with the IRS. Each IRS Tax Relief Program has its PROS & CONS Which I will be discussing.
IRS OIC & CNC are Financial Based tax resolution programs
What is the IRS offer in Compromise?
The IRS OIC completely eliminates your balances. How do we do this? When you make an offer to the IRS, it doesn't matter what amount you do owe. So you could owe $10,000, you could owe $100,000. If you offer the IRS $100, if they accept the $100, the rest is forgiven. It's down to zero.
What is the IRS Non-Collectable Status?
It's also a financial hardship. You have to prove you have financial hardship, that your income is less than your household expenses, and you have no equity and assets. So the IRS grants you a financial hardship. Well, to put it in a better way, it's as if the IRS grants you an installment agreement of $0 per month. You do not have to repay the money. Although the balance does exist and the program might be temporary in nature because it's good for about three or four years. So between the program itself on its surface, the offer in compromise seems like the better option. So, that one wins on the merits of the program itself.
What is the time frame for the IRS to approve the OIC vs CNC?
The IRS offer in compromise, that generally takes between seven to 10 months. This is right now occurring with a lot of COVID delays. Although you might get lucky, some might slip through the cracks and it might go through a little bit before. However, with the IRS offer in compromise, you do get assigned an IRS agent and it could take up to two years. The not collectable program on the surface, the moment you make the request, it has to go to a manager and the manager generally approves or denies. But you get a decision made generally between 14 days to 21 days. So time frame-wise, the not collectible status wins.
What IRS Tax Forms are required for the OIC & CNC Program?
In order for you to do an IRS offer in compromise, you have to do the calculation, which is on the 433-A (OIC). And also you make the offer on IRS Form 656. Each of these forms is eight pages long. In addition to that, for every single thing that you're putting on there, such as proof of income, and proof of expenses, you have to have proof of it all, including certain other expenses. For if you have student loans, child support, court order debts, health insurance, life insurance, and so on and so forth, all the substantiation.
What forms are required? In order for you to do an IRS offer in compromise, it does require a lot of forms. You have to do the calculation, which is on 433-A (OIC). And also you make the offer on form 656. Each of these forms is eight pages long. In addition to that, for every single thing that you're putting on there, such as proof of income, and proof of expenses, you have to have proof of it all, including certain other expenses. For if you have student loans, child support, court order debts, health insurance, life insurance, and so on and so forth, all the substantiation.
Now, the not collectible, depending on the level of collections you're in, is the type of forms that could be filled in. So if you have a local collector known as a revenue officer, you have to fill out the form called the 433-A. Now, it might be similar to the 433-A (OIC), but it's different. It's just a 433-A. And you also have to provide substantiating documents, such as proof of income, proof of expenses, and proof of assets.
But if you don't have a local officer assigned, then you're dealing with the ACS Collections Department and it's a 433-F, which is two pages long. You may have to provide proof of income and expenses, and so on and so forth. So for this one, because of document-wise, the not collectible is a little easier, a little faster.
The 10 year IRS Collections Rule is key Factor
Have you heard the saying that the IRS writes off millions and billions and gajillions of dollars? Weel, that’s true! What they mean is that the moment that have a IRS Tax Debt, the IRS has 10 years to collect from you. This 10 year rule is called the Collection Statute Expiration Date or “CSED”. Throughout the 10 years, the IRS will attempt to levy or garnish up to the full amount you owe if you do not take any action. In addition, the IRS most likely will also file federal tax liens. The IRS will do whatever is in their power to try to collect the back taxes from you before the 10 years is up.
Filing for an IRS OIC will place a stop time on the CSED. This is called a tolling event, which if the OIC is not successful, then you have extended the 10 years by the amount of time of the OIC procedure plus an additional 6 months.
The CNC status does not extend or Toll the CSED date. While you apply or granted CNC status, the time continues to tick which the CSED continues as schedule..
In regards to the IRS CSED Date, the CNC status the better option!
What happens after approval from the IRS for the OIC & CNC Program?
The moment you request relief and you get granted any type of relief program, the one thing you're supposed to do is not file any type of taxes late and not have any new additional balances due. This is just called compliance, moving forward. So when it comes to compliance, if you're on not collectible status, if you have a new balance due, that new balance will get sent to collections and you have to make the request on that additional balance. More than likely, if you do get sent to collections, everything else may also fall into collections. So you have to re-disclose all your financials and everything will get included in the not collectible status.
On the other hand, if you have an offer in compromise that has been approved and you got granted this, you have a five-year probationary period where you have to remain in compliance. If you do not remain in compliance, the whole balance will come back. That's right. They all come back. So it's very strict. So on that aspect, the currently not collectible status wins.
The IRS OIC program & the CNC Status are great Tax Relief Programs!
The one that's the best program would depend on your particular case. So in conclusion, between both of these programs, we have to evaluate including all factors,
