The resolution of a debt with the IRS can be achieved by different methods; the obvious one is full payment. If one cannot pay in full or believes the debt is false, other means are available. Installment agreements can be negotiated. Reductions are possible if reasonable cause can be established. Filing correct returns may be an option. Offer in Compromise is available if one qualifies. However, if one cannot afford or qualify for another program; temporary hardship or “Currently Not Collectible” (CNC) may be an intermediate resolution. It’s probably not a “final” resolution.

If you owe the IRS a large sum of money but don’t have the ability to make the debt payments right now, you may qualify for a hardship. The CNC program is not new, but the qualification for it is very difficult. Placing your account in distress is not guaranteed to be permanent. In fact, it will likely only last 18-24 months. However, it might give you time to recover and be able to make payments later. In rare cases, a hardship may remain until taxes expire, but don’t count on it!

To qualify for the IRS to suspend collection activity on your account, you must have filed at least 6 years of tax returns. You must also be in current tax compliance. This means you must have the correct tax withheld at your job or make proper estimated tax payments if you are self-employed. In addition, you must be able to show that your necessary living expenses meet or exceed your current income. Also, you must not have any substantial “liquid assets.” Liquid assets are things like bank accounts with large cash balances, money market funds, stocks, certificates of deposit, or unlent funds with cash value in life insurance, etc.

You will be asked to provide 3-6 months of documentation as proof of income and expenses (bills). If you have medical expenses, get proof of those, too. You may need to provide information about the car note as well as proof of rent or mortgage. Cable television, cell phone, country club or health club, and credit cards will not be considered when calculating your qualifications for CNC. These items are considered unnecessary by the IRS. Under the law, the IRS is a primary creditor for most debts.

When you call the IRS, be ready to give them a full estimate and fax or mail them proof of your situation. At http://www.irs.gov, you can download Form 433F. This form will help you organize your budget in a format accepted by the IRS. In some cases, you may need to complete forms 433A and 433B. If you call them unprepared, they may put you on a payment plan that you can’t afford. Even with testing, the IRS has set “national standards” for many items and you won’t be allowed costs in excess of that amount in many cases.

If your account is placed in a CNC with financial hardship, you still owe taxes, continue to accrue interest, refunds will be maintained, and a federal tax link may be filed. You will not be obligated to make individual payments while the case is in CNC. No bank levy or wage levy will occur while you are at CNC. However, unless the Statute of Limitations blows up, the tax will return to IRS collections at some point.

If your IRS debt exceeds $25,000, get professional help. A good CPA, enrolled agent, or tax attorney can help you deal with the IRS. The fees you pay will be well spent if you hire a competent and experienced professional. If you can’t afford professional help, the IRS has free help through the Office of Appeals and the Taxpayer Advocate Service. If you believe you are not being treated fairly, you can file an administrative appeal or a Form 911 with the Ombudsman.

You can contact the IRS at 1-800-829-1040 for general questions. The IRS Automated Collection Service can be reached at 1-800-829-7650. The telephone number of the Taxpayer Defense Service is

1-877-777-4778 or TTY/TTD: 1-800-829-4059.