A gas station and grill business in a small North Carolina town opened its doors in January 2020, just weeks before the pandemic turned every business plan upside down. Within that same year the owner was staring down a personal IRS collection case with no real way to pay it. PFGTAX stepped in, built the financial case for hardship, and got the IRS to agree the debt was not collectible right now. Here is how that happened.

How it started

The business opened its doors in the dead of winter, before anyone had heard the word lockdown. A gas station and grill depends on people driving to work, stopping for gas, and grabbing food on the way, and for a stretch of 2020 that steady flow of customers simply was not there. Supply problems, staffing gaps, and months of uncertainty hit convenience stores and food service operations especially hard, since they run on thin margins and cash flow that has to keep moving every single day. Payroll still had to go out every two weeks whether customers showed up or not, and somewhere in that first stretch, tax obligations fell behind. Once a business or its owner gets behind with the IRS, the balance grows fast. Penalties and interest keep adding on top of what was originally owed, and the letters start arriving not long after.

The pressure from the IRS

The IRS does not let a balance sit quietly. Notices escalate over time, and if nothing changes, the agency can eventually pursue what is called enforced collection. That means liens, which are legal claims against property, or levies, which let the IRS take money directly from a bank account or paycheck. For a small business owner already stretched thin, that kind of action can be the difference between staying open and shutting down. The owner reached out to PFGTAX to find out what options actually existed before things got to that point.

What we did

Our team filed a power of attorney so we could deal with the IRS directly on the owner’s behalf, which took the phone calls and the letters off the owner’s plate right away. We pulled the IRS transcripts to see exactly what was owed and for which periods, then sat down with the owner’s actual finances, income, expenses, and what was realistically left over each month once the bills were paid. The numbers told a clear story. After paying for housing, basic living costs, and keeping the business running, there was nothing left to send the IRS. That is the standard the IRS itself uses to decide whether a taxpayer qualifies for Currently Not Collectible status, often shortened to CNC. We put together the financial disclosure forms, backed them with documentation showing income and necessary expenses, and submitted the request to the IRS on the owner’s behalf.

The outcome

The IRS agreed. In September 2020, the personal case was placed into Currently Not Collectible status. In plain terms, that means the IRS has confirmed it cannot squeeze any more money out of the situation right now, so it stops active collection. No levy, no lien enforcement, no calls demanding payment. The debt itself did not disappear. Interest and penalties can keep building in the background, and the IRS will still apply any future tax refunds toward the balance. The owner also has to stay current on all future filings and payments, because falling behind again can end the CNC status just as fast as it started. But for a business trying to get its footing back after a rough first year, getting the IRS off the phone and out of the bank account bought real breathing room.

Why it matters

A lot of business owners assume that once the IRS starts sending threatening letters, there is nothing left to do but panic or ignore them, which almost always makes things worse. That is not true. The tax code has a real process for situations where someone genuinely cannot pay right now, and CNC status exists for exactly that reason. It is not a loophole. It requires full financial disclosure and it comes with real conditions attached. What it does offer is a legitimate, documented pause instead of a slow slide toward liens and levies. For a small business still finding its feet, that pause can be the thing that keeps the lights on.

Frequently asked questions

What does Currently Not Collectible status actually mean?

It means the IRS has reviewed a taxpayer’s income and expenses and agreed that, based on current finances, there is no ability to pay toward the tax debt right now. Under IRM 5.16, which is the IRS’s own internal manual section for collection of these cases, the IRS temporarily stops active collection efforts like levies while that status is in place. It is a pause, not a resolution of the debt itself.

Does the tax debt go away once CNC is approved?

No. The balance stays on the books, and penalties and interest can continue to accrue while the account sits in CNC status. Any future federal or state refunds the taxpayer is owed will typically still be applied against the balance. The debt is only fully gone once it is paid, settled another way, or the legal collection period runs out.

Can the IRS review or end CNC status later?

Yes. The IRS periodically reviews CNC accounts, and if a taxpayer’s financial situation improves, the status can be reversed and collection can start again. Staying compliant with all future filing and payment obligations matters too, since falling behind on a current year’s taxes can prompt the IRS to take a second look sooner.

How is CNC different from an installment agreement?

An installment agreement, covered under IRC 6159 and IRM 5.14, sets up monthly payments toward the debt because the taxpayer can afford something, even if not the full amount. CNC status is for situations where the numbers show there is nothing available to pay at all right now. Which one fits depends entirely on the specific financial picture.

Does a business have to close to qualify for CNC on a personal case?

No. CNC status is based on a documented review of income, necessary living expenses, and assets, not on whether a business is still operating. Plenty of business owners keep running their company while their personal tax case sits in CNC, as long as they can show the numbers support it and they stay compliant going forward.

Every case is different. Outcomes depend on a taxpayer’s specific financial situation, and PFGTAX does not guarantee any particular result or reduction in tax debt.