Home / Currently Not Collectible
IRS Hardship Status
The IRS is allowed to stop. You have to show it why.
Currently not collectible status is the IRS's acknowledgment that you cannot pay anything right now without hardship. It is not forgiveness. For many people on fixed or low incomes, though, it is the resolution, because the debt expires before their finances ever change.
The IRS can temporarily delay collection by reporting an account currently not collectible when paying would prevent you from meeting basic living expenses. You show this with a financial statement, Form 433-F or Form 433-A, and supporting documents. While the account is in that status the IRS generally does not levy, but interest and penalties keep accruing, refunds are applied to the debt, and the IRS may file a notice of federal tax lien. The ten-year collection period keeps running, and the IRS reviews your finances periodically.
How the IRS decides
The test is arithmetic. The IRS takes your household's monthly income and subtracts allowable expenses:
- National standards for food, clothing, and household items, by family size, allowed without receipts.
- Local standards for housing and utilities, set by county, and for vehicle ownership and operating costs. For Tarrant County and Dallas County, the housing figure is a cap, and it may be lower than your actual rent or mortgage.
- Health care, a standard amount per person plus documented costs above it.
- Other necessary expenses such as current taxes, court-ordered payments, child care, and term life insurance, if documented.
If nothing is left over, and you have no assets the IRS expects you to sell or borrow against, the account qualifies. Credit card payments, private school tuition, and help for adult children are not allowable, and a request that leans on them will fail.
What continues while you are in the status
- Interest and the failure-to-pay penalty keep accruing.
- Your tax refunds are applied to the debt.
- The IRS may file a notice of federal tax lien, typically for balances of $10,000 or more.
- You receive an annual statement of the balance.
- You must keep filing and paying current taxes. A new balance ends the status.
Review
The IRS flags hardship accounts for review when a later return shows income above a set level. If your finances have improved, it will ask for a new financial statement and may move you to an installment agreement. If they have not, the status continues.
How it compares
An offer in compromise ends the debt for good, but it costs a fee and a payment, requires five years of perfect compliance afterward, and stops the collection clock while it is pending. Hardship status costs nothing and keeps the clock running, but leaves the lien and the balance in place. For someone with little income, no assets, and a debt already several years old, hardship status is often the better tool, and an offer can still be filed later.
What happens if you do nothing
The IRS does not grant hardship status on its own. Without a request, the account proceeds to a final notice and then to levies on wages, bank accounts, and, for retirees, up to 15 percent of Social Security benefits through the automated federal payment levy program. A levy that is causing hardship must be released, but that takes the same financial showing, made under worse conditions.
When a lawyer matters
When your real expenses exceed the IRS standards and you need them allowed anyway, when there is equity in a home or a retirement account that the IRS will want used, when a spouse who does not owe the tax has income the IRS wants to count, and when the age of the debt makes timing the strategy. The financial statement is signed under penalty of perjury, so it has to be both favorable and correct.
Official sources
The rules described on this page come from these primary sources. Check them, or the notice you received, for current figures and dates.
When to call
Hardship status may fit if:
- Your income is Social Security, disability, unemployment, or a low wage.
- After rent, utilities, food, transportation, and medical costs, nothing is left.
- You own no real estate or have little equity in it.
- The tax debt is already several years old.
- The IRS is levying your wages or benefits and you cannot pay your bills.
- An offer in compromise is out of reach because you cannot fund even a small payment.
Common questions
Direct answers.
What does currently not collectible mean?
It means the IRS has determined that you cannot pay your tax debt without being unable to meet basic living expenses, and it has temporarily stopped trying to collect. The debt is not forgiven, and interest and penalties continue to accrue.
How do I get currently not collectible status?
By giving the IRS a financial statement, Form 433-F or Form 433-A, with proof of income and expenses, showing that your allowable living expenses equal or exceed your income and that you have no assets to pay from. All required tax returns must be filed.
Does the ten-year collection period keep running?
Yes. Currently not collectible status does not suspend the collection statute of limitations. If the period expires while your account is in that status, the remaining balance can no longer be collected.
Will the IRS take my refund if I am currently not collectible?
Yes. Refunds are applied to the outstanding balance while the debt exists, regardless of the account's status.
How long does currently not collectible status last?
As long as your financial situation does not improve. The IRS reviews these accounts when a filed return shows higher income and may ask for updated financial information.
Can the IRS levy Social Security benefits?
Yes. Through the Federal Payment Levy Program the IRS can take up to 15 percent of Social Security retirement benefits. A showing of economic hardship, including currently not collectible status, is grounds for release of that levy.
Related problems
IRS notices rarely arrive alone.
CP2000 Notice
The IRS says the income on your return does not match what employers, banks, or brokers reported. It is a proposal, not a bill, and it has a response date.
Read more →Final Notice of Intent to Levy
CP504, LT11, and Letter 1058 look alike and mean different things. One of them starts a 30-day clock that protects your bank account and your right to go to court.
Read more →Notice of Deficiency (90-Day Letter)
The IRS has formally determined that you owe more tax. You have 90 days to take the dispute to the U.S. Tax Court without paying first. The IRS cannot extend that date.
Read more →Bank Levy & Wage Garnishment Release
A frozen bank account is held for 21 days before the money goes to the IRS. A wage levy repeats every payday until it is released. Both can be released.
Read more →Offer in Compromise
The IRS will settle a tax debt for less than the balance when the numbers show it cannot collect the full amount. The formula is public. Most rejected offers ignored it.
Read more →Tax Attorney or Resolution Company?
Privilege, accountability, and who actually does the work. What changes when the person handling your IRS problem is a licensed attorney you can name.
Read more →Next step
If the numbers show you cannot pay, the IRS has a status for that.
Send a rough list of monthly income and expenses and the date the tax was assessed, if you know it.