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The IRS offers hardship status for those who cannot pay their tax debt. This is called Currently not Collectible. To qualify for this status, you need to prove that you are unable to pay your tax debt because of financial hardship.
To qualify for Currently Not Collectible (CNC) status, your filing requirements must be met and your tax debt must be less than $50,000. The IRS will consider the following factors when determining if you qualify:
1. You owe less than $50,000 in combined federal income taxes and penalties (including interest).
2. You have no outstanding collection actions against you. This includes any legal action taken by the government to collect a debt from you or garnish your wages or bank account.
3. It also includes levies on your property or bank accounts, liens on property owned by you or filed against property belonging to someone else that was sold at auction under a judgment against you, and seizures of property belonging to others that were sold at auction under a judgment against you.
You have experienced "economic hardship" due to circumstances beyond your control that prevented payment during the last three years of the five-year period ending on the date of application for currently not collectible status (except if those circumstances were caused by fraud). Economic hardship includes losses
C. When a taxpayer (or their assets) cannot be located; or
If you are unable to pay your tax debt, the IRS has a program called Currently Not Collectible (CNC). The CNC status is available to taxpayers who cannot pay their entire tax debt because of financial hardship.
The IRS issues a Currently Not Collectible (CNC) letter to inform you that they have approved your request for CNC status. The letter explains how long the CNC period will last and what you need to do while it is in effect.
Here are some things to know about CNC:
It can help with credit scores and improve your ability to get loans or credit cards.
It doesn't eliminate penalties or interest on your debt but it does stop collection actions by the IRS for six months at a time. If you qualify for CNC status again in the future, it will continue where it left off the previous time.