When you’re staring at a tax bill you can’t pay, the IRS "Fresh Start" program offers two major lifelines: the Offer in Compromise (OIC) and Currently Not Collectible (CNC) status.
Both can stop a levy and protect your bank account, but they work in fundamentally different ways. Choosing the wrong one could cost you thousands in the long run or waste precious time on the collection clock. Here is how to decide which path fits your 2026 financial reality.
The Core Difference: Settlement vs. Hardship
| Feature |
Offer in Compromise (OIC) |
Currently Not Collectible (CNC) |
| End Goal |
Settle the debt for a reduced amount. |
Pause collections due to hardship. |
| The Debt |
Balance is wiped clean once paid. |
Balance remains (and grows). |
| Payments |
Requires a lump sum or 24-month plan. |
$0 per month. |
| Duration |
Permanent resolution. |
Temporary (reviewed annually). |
| The "Clock" |
Pauses the 10-year statute of limitations. |
Does NOT pause the 10-year statute. |
When an Offer in Compromise (OIC) is the Winner
An OIC is a "front-end" settlement. It is best if you want the debt gone and have a small amount of cash or equity to offer.
- You have some assets: If you have $10,000 in the bank but owe $100,000, the IRS may take that $10,000 to settle the entire $100,000.
- You want to protect your future income: Once an OIC is accepted, you can win the lottery or get a high-paying job the next day, and the IRS cannot come back for more.
- You need a clean credit slate: An accepted OIC leads to the withdrawal of federal tax liens.
When Currently Not Collectible (CNC) is the Smarter Play
CNC is a "back-end" settlement strategy. The IRS acknowledges you can't pay for essentials (rent, food, medicine), so they set your payment to $0.
- The "CSED" Strategy: The IRS generally only has 10 years to collect a debt (the Collection Statute Expiration Date). Because CNC does not pause this clock, if you remain in CNC status for 3 years and your statute expires, the debt is legally extinguished.
- Zero Disposable Income: If your Reasonable Collection Potential (RCP) is zero, the IRS might reject an OIC because you can't even afford the settlement. CNC is the safety net.
- No Application Fee: Unlike the OIC ($205 fee), there is no fee to request CNC status.
The Hidden Trap: The Statute of Limitations
This is the most important factor in your decision.
- OIC Trap: Filing an OIC "tolls" (freezes) the 10-year collection clock. If the IRS spends 2 years reviewing and then rejecting your offer, you’ve just given them 2 extra years to collect from you.
- CNC Advantage: If you are in year 8 of your 10-year collection window, it is often better to enter CNC and "wait out" the final 2 years rather than file an OIC and reset the clock.
Strategic Summary: Which One Fits You?
Choose OIC if:
- Your debt is relatively new (e.g., 2023–2025).
- You have a specific amount of money you can offer now.
- You expect your income to increase significantly in the next 1–2 years.
Choose CNC if:
- Your debt is old (approaching the 10-year mark).
- You have absolutely no disposable income after basic living expenses.
Expert Analysis by Wolf Tax
Choosing between OIC and CNC isn't a guessing game—it's a calculation. At Wolf Tax, we calculate your "Statute Dates" (CSED) before we ever suggest a program. If we see your debt is about to expire, we won't let you file an OIC that gives the IRS more time to chase you.