Key Takeaways
The IRS Hardship Program (Currently Not Collectible status) temporarily stops IRS collections when you can’t afford to pay your tax debt.
To qualify for an IRS hardship, you must prove financial hardship by showing your income doesn’t cover necessary living expenses.
IRS hardship is not tax forgiveness; interest continues to grow, and the IRS will review your financial situation regularly.
What is The IRS Hardship Program?
The IRS hardship program, most commonly known as Currently Not Collectible (CNC) status, provides temporary relief for taxpayers who are unable to pay down their tax debt due to extreme financial hardship.
Pros & Cons of IRS Hardship
One of the biggest pros of the IRS hardship program is that once you are approved, you are not required to make any payments toward your existing tax balance. Additionally, most collection actions cease. This includes wage garnishment, bank levies, and property seizures.
Unfortunately, penalty and interest fees will continue to grow while you’re in CNC status. The IRS is also likely to maintain or file a tax lien if your debt balance is over $10,000.
Who Qualifies For IRS Hardship?
- Demonstrated Financial Hardship. You must provide evidence that paying your taxes would cause severe financial distress, making it difficult for you to cover necessary living expenses, such as food and housing.
- Up-to-Date on Tax Filing Requirements. All required tax returns must be filed, even if you can’t pay what you owe.
- No Available Assets. If you have a home with equity that you can borrow against or other available assets you can sell, the IRS will likely deny your hardship request.
Allowable Expenses
The IRS uses national and local standards to compare your monthly income against your allowable expenses to determine if you truly meet the requirements for CNC status.
Allowable expenses typically include:
- Food
- Clothing
- Household supplies
- Personal care products
- Health care expenses
- Housing fees (rent or mortgage)
- Utilities
- Transportation costs
You must show that you have little or no disposable income (total monthly income minus total allowable living expenses) before the IRS will approve your hardship status. If you have any disposable income, you will be expected to use that to pay toward your existing tax debt.
How to Apply For an IRS Hardship
If you’re unable to pay your tax debt without sacrificing basic living expenses, you may qualify for an IRS hardship (CNC status). Although the IRS doesn’t offer a formal “application” for hardship, you can request this status by providing detailed financial information that proves your inability to pay.
Here are the four (4) steps needed to apply for hardship status:
Step 1 – Gather Financial Information
Before reaching out to the IRS, you’ll need a clear picture of your financial situation. The IRS will evaluate whether you can afford to pay anything toward your tax debt, so be prepared to provide the following information:
- Monthly income (wages, self-employment, benefits, etc.)
- Monthly living expenses (rent, utilities, food, transportation, healthcare)
- Bank account balances
- Assets (vehicles, property, investments)
Having this information ready will help speed up the process and improve your chances of qualifying for an IRS hardship.
Step 2 – Complete IRS Form 433-A or 433-F
To request CNC status, the IRS typically requires you to complete a financial disclosure form, such as:
- Form 433-F (Collection Information Statement)
- Form 433-A (for self-employed individuals or more complex cases)
On this form, you’ll be required to list everything you own, as well as the fair market value (FMV) of each item. Additionally, you’ll need to submit income and spending statements for the last three (3) months.
Step 3 – Submit Application
Once your collection information statement is ready, you can contact the IRS directly to request Currently Not Collectible status.
You can:
- Call the IRS using the number on your notice, or
- Work with a tax professional to submit your request on your behalf
During this step, the IRS may ask questions about your finances and request supporting documentation.
Step 4 – Wait For IRS Decision
After submitting your financial forms and documentation, the IRS will review your case to determine whether you qualify for hardship status.
If approved:
- Collection efforts will be temporarily suspended
- You won’t be required to make payments while in hardship
If additional information is needed, the IRS may follow up before accepting or denying your request for CNC status.
What Happens After You’re Approved?
Once you’re placed in IRS hardship status, you won’t be required to make payments toward your existing tax debt, and collection actions will cease. It’s also very important to stay compliant with your tax obligations.
- File all future tax returns on time
- Notify the IRS if your financial situation improves
- Be aware that the IRS may periodically review your account
Failing to stay compliant could result in the IRS removing your hardship status and resuming collection activity.
How Long Does IRS Hardship Last?
Your eligibility for the hardship program will likely be reviewed annually by the IRS. If you remain in the program for more than 10 years (statute of limitations), the tax debt will be forgiven. Should your financial situation improve before the statute of limitations runs out, however, you’ll be expected to pay not only the past due balance, but also all penalties and interest fees.
Can The IRS Deny a Hardship Request?
Yes. The IRS can and will deny a hardship request if you fail to prove financial hardship, are behind on filing your tax returns, or if there are discrepancies in the financial statements provided.
Other Tax Relief Options
If you are not eligible for an IRS hardship, other options may provide some relief, including:
IRS Payment Plans
An IRS payment plan allows you to pay off your tax debt over time. Depending on your situation, you may qualify for a short-term (up to 180 days) and/or long-term agreement. You may apply for a payment plan by phone, mail, or online. There are setup fees associated with long-term plans. Both agreements, however, will continue to accrue penalties and interest until the balance is paid in full. Once you are approved for a payment plan, collection actions will cease, as long as you continue to make your payments on time.
Offer in Compromise
An Offer in Compromise (OIC) allows you to settle your tax debt for less than the full amount. It’s about as close as you can get to tax forgiveness. Unlike payment plans, however, the process of getting approved for an OIC is much more difficult. The IRS will generally consider an OIC if one of the following is true:
- The IRS made an error in determining the amount you owe.
- They don’t believe that they can fully collect the amount owed (you don’t have enough assets or income to cover the debt).
- Paying your back taxes would cause extreme financial hardship.
Additionally, the IRS will only consider your OIC if you are up to date on all tax return filings. You must also meet the following requirements:
- Be current on all estimated tax payments for the year (if applicable)
- No open bankruptcy proceedings
- Not currently being audited by the IRS
- No open innocent spouse claims
- Your case has not been sent to the Department of Justice
- Make all required federal tax deposits for the quarter (business owners)
You’ll also need to include at least one tax bill with your offer and the initial payment (this is based on the amount of your offer).
Should You Get Help Applying For IRS Hardship?
Although it’s possible to request IRS hardship status on your own, the process can be more complicated than it seems, especially if your financial situation is complex or the IRS is already taking collection action.
Applying for IRS hardship requires detailed financial disclosures, accurate documentation, and a clear understanding of what the IRS considers “allowable” expenses. Even small mistakes or missing information can lead to delays or your request being denied.
Working with an experienced tax relief provider may help you:
- Avoid costly mistakes on IRS financial forms
- Maximize allowable expenses to improve your chances of qualifying
- Navigate IRS communications and requests more efficiently
- Explore other tax relief options if hardship isn’t the best fit
IRS hardship status can provide meaningful relief, but only if your request is handled correctly. If you’re unsure about the process or want to improve your chances of approval, getting professional guidance can make a significant difference.