Establishing Hardship to Delay Collections: What Counts

Overview

When a taxpayer cannot pay a federal tax bill without putting themselves or their dependents below basic living standards, the IRS may delay collection activity. That delay usually takes the form of a temporary suspension of enforcement (commonly known as Currently Not Collectible, or CNC) or negotiating reduced, short-term payment arrangements. Establishing hardship is about documenting inability to pay and communicating that to the IRS in a way the agency recognizes and accepts.

Author note: In my 15 years advising clients on IRS collections I’ve found the difference between a quick collection pause and an ignored notice is how complete and organized the financial documentation is. The IRS does not accept vague claims of hardship — it expects evidence tied to allowable living standards and income.

(Authoritative sources: IRS collections guidance and the Taxpayer Advocate Service provide the official framework for CNC and collection alternatives.)

Why proving hardship matters

A successful hardship claim stops aggressive collection actions such as bank levies, wage garnishments, and third-party levies for a time. It does not erase the debt — interest and penalties usually continue to accrue and a tax lien may remain in place — but it buys breathing room to address underlying financial problems or pursue longer-term solutions like an Offer in Compromise or an installment agreement.

Key points:

• Hardship relief can pause most enforcement actions, giving you time to recover. (IRS: Currently Not Collectible)
• The IRS will re-evaluate your financial situation periodically and can resume collection if your ability to pay improves.
• Interest and penalties generally continue to accumulate even during a CNC period.

What IRS options are available when you show hardship

• Currently Not Collectible (CNC): The IRS classifies your account as uncollectible if your reasonable living expenses exhaust your disposable income. Collections are generally suspended while CNC is in effect, but the lien remains and penalties/interest continue. (See internal resource: What ‘Currently Not Collectible’ Really Means for You.)

• Partial-payment installment agreement: If you can make reduced payments without harming necessities, the IRS may accept a smaller monthly payment based on your Collection Financial Standards.

• Short-term delay: Sometimes the IRS will grant a temporary hold (e.g., 30–120 days) to allow you time to take specific steps like obtaining employment or liquidating an asset.

• Offer in Compromise: In rare cases where paying the full tax would create future economic hardship, an Offer in Compromise can settle the liability for less than the full amount. Eligibility requires thorough financial disclosure and strict criteria.

What the IRS expects: documentation checklist

The IRS evaluates hardship claims using a financial snapshot. Gather the following items before you contact the IRS:

• Identity and contact information (SSN or EIN, current address, best phone number)
• Proof of income: recent pay stubs, unemployment award letters, Social Security/SSI statements, pension statements
• Bank statements (30–90 days)
• Proof of major outstanding bills: medical bills, mortgage/rent statements, utility bills, insurance premiums
• Proof of exceptional expenses: child-care, disability-related costs, continuing medical treatment
• A current monthly budget listing essential vs. nonessential expenses
• Business cash-flow statements (for self-employed taxpayers)

The IRS wants verifiable facts — handwritten estimates and missing evidence weaken your position. For CNC and many installment agreements you will usually complete a Collection Information Statement (Form 433-F for individuals commonly used in collections)—the IRS will specify which form or documentation it requires.

Internal resources: see Currently Not Collectible Status: Financial Documentation the IRS Expects and How to Request Currently Not Collectible Status for examples and templates.

(Authoritative: IRS collection financial standards and Form 433 series.)

Step-by-step process to establish hardship (practical checklist)

1. Read your notice and take timely action. If you received a levy or final notice, respond immediately — delays reduce your options.
2. Build a complete financial packet: income, expenses, bank records, and bills (see checklist above).
3. Determine the relief you’ll request: CNC, short-term hold, or reduced payments. Be realistic — request what your budget shows you truly cannot pay.
4. Contact the IRS Collections Unit named on your notice, or call the general collections line. Ask which Collection Information Statement (Form 433 series) applies.
5. Submit requested forms and supporting documents promptly. Keep copies and create a document list for reference.
6. Follow up. If you don’t hear back within the timeframe stated in the notice, call to confirm receipt and request an estimated review date.
7. Keep records of any agreements or supervisory approvals in writing. If the IRS places your account in CNC, get the date and details in writing.

Practical tip from my practice: email or fax the documentation where possible and request a confirmation number. When documentation is delivered in person, obtain a stamped receipt.

How long will a hardship delay last?

There’s no universal timeline. CNC can be short-term (months) or extend for years depending on your circumstances and whether your situation changes. The IRS typically reviews CNC accounts periodically. If your income increases or expenses fall, they may resume collection and ask you to enter an installment agreement or reconsider collection alternatives.

Note: While collections are paused, penalties and interest generally continue to accrue and may increase your balance. If you need permanent relief from the full balance, explore an Offer in Compromise, which has stringent eligibility rules.

Common pitfalls and how to avoid them

• Claiming hardship without proof: The IRS needs documentation. Don’t rely on verbal assurances.
• Ignoring notices: Non-response limits your options and can trigger levies or wage garnishments.
• Assuming CNC removes liens: CNC typically suspends collection but does not remove a federal tax lien; liens often remain until the tax is paid or otherwise resolved.
• Failing to update the IRS about changed circumstances: If your income improves, notify the IRS proactively to avoid penalties for nondisclosure.

When you should get professional help

If your situation involves business income, complex assets, pending levies, or imminent wage garnishments, contact a tax professional. Experienced representatives can prepare stronger financial packages, request appeals or Collection Due Process hearings if appropriate, and negotiate alternatives such as partial-payment installment agreements.

In my practice, helping clients move from an immediate crisis to a stable payment plan often reduces overall collection cost — and prevents harmful interruptions like bank levies that can destabilize household finances further.

Quick FAQs

• Will interest and penalties stop if the IRS grants hardship? No. Interest and penalties typically continue, though enforcement actions pause. (IRS collections guidance.)

• Does hardship erase the tax debt? No. Hardship delays collection but does not remove the debt; only settlement options like Offer in Compromise or bankruptcy (in very limited situations) can reduce or discharge tax liabilities.

• Can the IRS still file or keep a federal tax lien? Yes. A lien may remain in place while your account is CNC.

Immediate steps if you receive a notice of intent to levy

1. Contact the IRS right away and request information about your options; do not ignore the deadline.
2. Prepare and submit your Collection Information Statement and supporting docs to demonstrate hardship.
3. If eligible, request a Collection Due Process (CDP) hearing to contest a levy (time-sensitive). The Taxpayer Advocate Service can assist if you have systemic issues or face financial hardship due to IRS action.

(Authoritative: Taxpayer Advocate Service guidance on levy relief.)

Resources and internal guides

• Detailed guide to CNC: What ‘Currently Not Collectible’ Really Means for You — https://finhelp.io/glossary/what-currently-not-collectible-really-means-for-you/
• How to request CNC status: How to Request Currently Not Collectible Status — https://finhelp.io/glossary/how-to-request-currently-not-collectible-status/

Authoritative external resources:

• IRS collections and financial standards information (IRS collections pages and Form 433 instructions). See the IRS collections pages for current forms and standards at irs.gov.
• Taxpayer Advocate Service — for help when IRS actions create financial hardship.

Disclaimer: This article is educational and does not constitute tax, legal, or financial advice. Every taxpayer’s situation is different. For personalized guidance, consult a licensed tax professional or attorney.

If you want, I can prepare a checklist template you can use to assemble the documentation the IRS will expect.