A husband and wife who ran a small hair salon business in Georgia spent more than a decade under IRS collection pressure before their case finally closed. Between personal income tax and a trust fund penalty tied to old payroll taxes, they owed the IRS over $200,000. In December 2025, the IRS agreed to place the entire balance in Currently Not Collectible status, which means active collection has stopped for now because the couple cannot afford to pay.

How it started

Like a lot of small business owners, this couple ran their salon through an LLC and handled payroll themselves for a while. At some point the business fell behind on the payroll taxes it withheld from employee paychecks, the money meant to cover Social Security, Medicare, and income tax withholding. When a business does not send that money to the IRS, the agency can assess what is called a trust fund recovery penalty, or TFRP, against the person or people it decides were responsible for making the payment. That penalty becomes a personal debt, separate from anything owed by the business itself.

On top of that, the couple also had unpaid personal income tax. By the time PFGTAX got involved, the combined balance between the personal tax and the trust fund penalty had grown past $200,000 once interest and penalties were added in.

The pressure from the IRS

PFGTAX filed power of attorney paperwork with the IRS back in 2013 and has represented this couple ever since, through more than one wave of collection activity. Early on, the case went through a Collection Due Process hearing, the formal appeal a taxpayer can request after the IRS sends a notice threatening a levy. PFGTAX also requested and received a short term stay of enforcement, buying time while the team worked out a longer term plan.

The road was not straight. An early attempt at an Offer in Compromise, where a taxpayer proposes to settle a tax debt for less than the full amount, was denied because the couple was not yet current on their tax filings. The IRS will not approve any resolution while a taxpayer still has unfiled returns or missed deposits, so getting caught up came first. Once compliance was in better shape, PFGTAX submitted financial documents and proposed Currently Not Collectible status to the IRS’s Automated Collection System, and the case moved into that status for a period. Years later, the team also prepared and submitted an Offer in Compromise application, though that route did not lead to an accepted settlement in this case.

What we did

Throughout, PFGTAX kept renewing the power of attorney, pulling updated IRS transcripts, and refreshing the couple’s financial picture as their circumstances changed. That is normal for a case this long. A family’s income, expenses, and ability to pay do not stay fixed for ten years, so the strategy has to be revisited whenever something shifts. PFGTAX also tracked the collection statute expiration date on the trust fund portion of the debt, since penalties and taxes do not stay collectible forever, and made sure the couple stayed protected from enforced collection, like a bank levy or wage garnishment, while the case was open.

In late 2025, PFGTAX put together a fresh financial statement showing the couple’s current income and reasonable monthly expenses. That statement showed they still could not afford to pay anything meaningful toward the balance without falling short on basic living costs.

The outcome

On December 1, 2025, the IRS approved Currently Not Collectible status for the couple’s personal case, covering both the income tax debt and the trust fund penalty together. The IRS confirmed that the collection case is temporarily closed. The couple will still receive an annual reminder notice about what they owe, and any tax refunds they are due will keep being applied to the balance, but the IRS is not actively pursuing collection against them right now.

CNC status is not permanent forgiveness. The couple has to stay current on filing returns and paying any new taxes as they come due, or the status can be reversed and the debt can become collectible again. PFGTAX will keep monitoring the case going forward.

Why it matters

A ten year collection case with a trust fund penalty attached is about as stressful as tax debt gets, and it is easy to assume nothing can be done once a business falls behind on payroll taxes. This case shows that even a debt over $200,000, split between a personal balance and a trust fund penalty, can end up in a stable, protected status when the facts support it and someone stays on top of the case for as long as it takes. It also shows why these cases often are not resolved quickly. Financial situations change, filing compliance has to be maintained, and sometimes the right resolution only becomes available after other options have already been tried.

Frequently asked questions

What does Currently Not Collectible status actually mean?

It means the IRS has reviewed a taxpayer’s finances and agreed that they cannot pay anything right now without falling short on basic living expenses. Under IRM 5.16, the IRS can suspend active collection, like levies and garnishments, while a case is in this status. It is a pause, not a write off of the debt.

Does the debt go away once a case is marked Currently Not Collectible?

No. The balance stays on the books, interest continues to accrue, and any refunds the taxpayer would otherwise receive are usually applied to the debt. If the collection statute expires before the IRS resumes collection, the remaining balance becomes uncollectible by law, but that is a separate event from the CNC status itself.

What is a trust fund recovery penalty and why did it become a personal debt?

When a business withholds payroll taxes from employee paychecks but does not forward that money to the IRS, the IRS can assess a penalty equal to that unpaid amount against whoever it determines was responsible for making the payment. Because it is assessed against an individual rather than the business, it follows that person even if the business later closes.

Can Currently Not Collectible status be taken away?

Yes. The IRS reviews these cases periodically, and if a taxpayer’s income improves or they fall out of compliance with filing and paying current taxes, the IRS can move the case back into active collection. Staying current going forward is part of keeping the status in place.

Why did the Offer in Compromise attempt not work out for this couple?

An Offer in Compromise settles a debt for less than what is owed, but the IRS only accepts offers that reflect what it believes it could reasonably collect given a taxpayer’s income and assets. Not every case that applies gets accepted, and sometimes Currently Not Collectible status turns out to be the more realistic path forward given the numbers.

Results depend on each taxpayer’s specific facts and financial situation. PFGTAX does not guarantee any particular outcome or reduction in tax debt.