Filing for Hardship with the IRS: How to Get Uncollectible Status

filing for IRS hardship

If you truly cannot afford to pay your IRS tax bill, you may qualify for hardship status (also known as currently not collectible or CNC status). To apply for hardship status, contact the revenue officer assigned to your case, or file Form 433-F with a written request to put your account on currently not collectible status.

In most cases when applying, you need to give the IRS detailed financial information or prove you qualify for an exception such as having a terminal illness or being in a combat zone. You have to convince the IRS you cannot afford to pay your tax debt and that forcible collection would cause severe financial hardship. You may also have to meet other requirements during the CNC application process.

Key takeaways

CNC status stops IRS collection actions (wage garnishments, etc) against you.
To apply, file Form 433-F or 433-A if requested by a revenue agent.
Include financial details about all of your income, expenses, assets, and debts.
Expenses must be less than the IRS's financial standard allowances.
Attach supporting documents to back up numbers.
Be ready to explain special circumstances such as illnesses.
Consider writing a hardship letter to the IRS.

Keep reading for an overview of CNC status and tips on how to apply for CNC status in different situations.

What Is Hardship Uncollectible Status? Who Qualifies?

Hardship status applies to individuals, sole proprietors, partnerships where a general partner is liable for the tax, and limited liability companies (LLCs) where a single owner is liable. Moreover, it is also called currently not collectible (CNC) or status 53. Hardship status can stop collection activity for certain tax years where a taxpayer has a liability, but the IRS does not grant this status lightly.

In essence, CNC status is forbearance by the IRS. Just like when receiving a deferment or forbearance with a student loan, interest continues to accumulate on your tax debt. However, with the IRS, penalties also accumulate until the failure-to-pay penalty reaches 25% of your balance, and in most cases, the IRS will file a federal tax lien against you.

Working With an IRS Representative on Hardship Status

If you have been working with an IRS representative, you can ask the IRS to mark “status 53” on your file or ask for currently not collectible status. Status 53 means the collector or IRS representative has filed Form 53 (Report of Currently Not Collectible Taxes). The IRS files this form internally. However, the IRS will generally require you to share detailed information about your finances by completing documents such as Form 433-A for individuals or 433-B for businesses. The IRS employee will also dig a bit further into your background by pulling credit reports or doing public records searches - the extent of their due diligence varies based on how much you owe.

How to File for Hardship: Applying for Currently Not Collectible Status

If you have not been assigned to a revenue officer, you can generally apply for CNC status by completing Form 433-F. However, in some rare instances, you don't have to complete this form or any other financial disclosures. For example, this may apply if the taxpayer is terminally ill, has excessive medical bills, is incarcerated, is on unemployment, only receives Social Security as income, or is in a combat zone. If an extenuating circumstance applies, reach out to the IRS directly. Otherwise, get ready to complete Form 433-F.

These forms request incredibly detailed information about your financial situation. The IRS uses this information to determine your collection potential. In other words, the IRS decides if you can afford to pay them based on the financial information you provide to them using Form(s) 433.

Information Required to Complete a Collection Information Statement

Here is some information you need to fill out these forms. Note that you may also have to provide copies of the supporting documents to the IRS:

Personal information (phone number, address, Social Security Numbers, age, details about the health of dependents, living arrangements, etc.).
Employment information (name of employer, occupation, work phone number, pay stubs, how long employed, etc.).
Other income (pensions, annuities, social security payments, child support, alimony, investment income, etc.).
Bank and financial information (checking account statements, list of liquid assets, investment accounts, credit card statements, insurance policies, etc.).
Information on any legal proceedings (for example, collection activities against you such as liens or garnishments).
Three months worth of copies of monthly bills and expenses, which can include:
- Food
- Housing (Rent, Mortgage, Taxes, etc.)
- Apparel and Services
- Transportation Costs
- Utility Costs
- Personal Care
- Medical Expenses
Proof of medical conditions (If disabled, you need to show proof such as hospital bills or government records.)
Copies of your most recent tax return(s) (IRS Form 1040, 1040A, or 1040EZ). In many cases, if you have unfiled tax returns, the IRS will ask you to file them first.
When taxpayers owe over a certain threshold, the IRS may ask for motor vehicle records, and credit reports and check courthouse records to see if the taxpayer has personal property or real property ownership.

The IRS looks at your assets and if there is no equity in them or if seizing them to pay your tax liabilities creates a financial hardship, obtaining a hardship status is more likely. For example, if selling your home would make you homeless, the IRS is not going to require you to give up the equity in your home to repay your tax debt.

Understanding Financial Collection Standards

Saying that you cannot afford to pay taxes is a very subjective statement. The IRS will only accept this statement if you prove that you cannot afford to pay necessary living expenses and your back taxes at the same time. If you have a lot of unnecessary expenses, the IRS will reject your CNC application, and they will expect you to modify your budget so that you can make payments toward your taxes.

This process is not arbitrary. Every year, the IRS creates financial standards that outline how much the average taxpayer should pay out in monthly expenses. The allowed amounts for food, clothing, cleaning supplies, and misc expenses are set on the national level. Out-of-pocket healthcare expenses are also on the national level, but you get a higher allowance once you're over 65. Housing and utility allotments are based on the cost of living in your county, and they vary drastically in different locations. Finally, transportation costs for public transit are set on the national level as are car ownership costs, but car operating costs vary from region to region.

To give you an example, say you live in Fresno County, California, and you are a single taxpayer. As of 2024, the IRS allotment for the monthly housing and utility expenses is $2,003. If your monthly rent and utilities are $3,003, the IRS will consider the extra $1,000 as an unnecessary expense. Thus, you have two options if you want to qualify for CNC. 1) You can move into a less expensive home or find a way to significantly reduce your utility bills, or 2) You can convince the IRS that there is a compelling reason to accept an amount that is above the standard allowance.

How to Write a Hardship Letter to the IRS

In addition to filing the collection information statement, you may also want to write the IRS a letter asking for hardship relief. Make sure to identify yourself in the header and the text of the letter, and include your name, Social Security Number, and contact details. Also, note the type of tax (generally income tax) and the tax year you are requesting hardship status.

In the letter, explain how you got into tax debt. For example, if you had self-employment income that led to the tax debt, explain why you didn't set aside the taxes and outline what you are doing to avoid the situation in the future. Similarly, if unexpected medical bills or other expenses prevented you from paying your taxes, spell that out in the letter.

Then, attach documents that support your situation, such as bank statements, medical bills, or letters from doctors. Be polite. Although having a tax bill can be frustrating, you should avoid being angry or insulting the person reading the letter. As much as possible, stick to the facts and keep emotion to a minimum.

You can send a hardship letter to the IRS on its own, but for best results, you should send the letter along with the 433 form and your supporting documents. A tax attorney can easily write this letter for you after you talk with them about your situation.

When to Hire a Professional to Help You Apply for CNC Status

A tax professional can help you ensure that you're selecting the best option for your situation. They work with the IRS every day, and they know the options inside and out. That said, in some cases, you may be fine to handle a CNC application on your own, but in others, you may greatly benefit from working with a pro. Here are a few signs that you should contact a tax professional:

The IRS is garnishing wages or levying assets - If you're in the middle of an active levy, a tax pro can help you get the levy released as you work on your CNC application.
You're overwhelmed by the collection information statement - A tax pro can ensure that this form is filled out accurately, and they can answer any questions you have.
You have assets but cannot access equity - It's hard to get CNC status if you have a lot of equity in your assets, but in some cases, you can get your application approved with equity in your assets. For example, that might come into play if selling the asset would create financial hardship or if you use the asset to earn income.
You have transferred assets in the last 10 years - The CNC application requires a list of your current assets and anything you've transferred in the last 10 years. If you're worried that a recent transfer will raise a red flag to the IRS, you should work with a pro.
You need exceptions to the IRS financial standards - The IRS has set standards for what it allows you to spend every month if you're on CNC status. If your expenses go over the limits, a tax pro can help you argue why the extra expenses are necessary.
You don't know how to assign a fair market value to your assets - Tax pros cannot formally appraise your assets, but they can tell you when a formal appraisal is necessary or help you come up with values in other ways, such as looking at comps.
You have unfiled tax returns - The IRS won't give you CNC status if you have unfiled tax returns. A tax pro can help you file the returns and apply for CNC status on all of the unpaid taxes.

You should also consider working with a tax professional if you're unsure about whether or not CNC is the right option for you. A tax pro will talk with you about your current and future finances. They'll help you pursue the best path possible, and they will also help you develop a plan so that you don't incur tax debt in the future.

Confirming CNC Status

Once the IRS confirms CNC status, they will send you a letter, usually letter 4223, Case Closed – Currently Not Collectible. Furthermore, IRS account transcripts will have similar language. If the IRS denies your application, they will let you know, and they will require you to make other arrangements such as paying in full or setting up monthly payments.

Proving financial hardship is not easy, but it is possible if you meet the requirements. Check with a professional before trying to file for uncollectible status on your own. A licensed tax professional can help you decide if declaring hardship is the best option for you.

One thing to keep in mind is that being classified as currently not collectible doesn’t solve your tax problem, but it can buy you time to get back on your feet. It can also serve as a great option if you do not expect your income to rise in the future (e.g., you are retired). If your situation does not change by the time the CSED(s) or collection statute expiration date arrives for a given year, the taxpayer will no longer have to pay the money owed for that year. You can find answers to frequently asked hardship questions here.

Other IRS Hardship Waivers and Programs

When most people talk about IRS hardship, they are specifically referring to the IRS currently not collectible status, but there are other types of hardship including the following:

Form 1127 (Application for Extension of Time for Payment of Tax Due to Undue Hardship) - If you're filing a tax return or have received a notice of deficiency, use this form to request up to six months (12 in exceptional circumstances) of extra time to pay. If you qualify, the IRS will not add penalties to your account.
Form 8922 Preparer e-file Hardship Waiver Request - If you are a tax preparer who cannot e-file returns due to bankruptcy, economic hardship, or a disaster area, file this form to ask for a waiver from the e-filing requirement.
Levy hardship - If an IRS levy (wage garnishment, bank freeze, asset seizure, etc) is causing financial hardship, reach out to the IRS immediately, and ask them to release the levy. Be prepared to explain the hardship in detail.
Form 911 (Request for Taxpayer Advocate Service Assistance) - Use this form if you're experiencing hardship due to the IRS's actions or if you're unable to resolve your tax problem through the usual IRS channels.
Hardship distribution - Some retirement plans allow you to take hardship distributions for qualifying expenses such as medical bills, funeral costs, repairing damage to your primary residence, and other "immediate and heavy" costs. You will incur income tax and potentially an early withdrawal penalty on the distribution, and you cannot repay the funds or roll them into another retirement account.

Get Help Applying for Currently Not Collectible Status

If you cannot afford to pay your tax bill, you can stop unwanted collection actions by requesting currently not collectible status. The IRS doesn't grant status 53 very easily, so be prepared to fill out detailed paperwork and write a hardship letter. To get help, use TaxCure to search for a tax pro based in your area who has experience with IRS hardship cases.