The IRS considers you to be in financial hardship when paying your tax debt would prevent you from meeting basic living expenses. This status is officially called Currently Not Collectible, and it temporarily stops IRS collection activity on your account.

To qualify, you need to prove that your income minus allowable living expenses leaves nothing for tax payments. The IRS uses specific guidelines called Collection Financial Standards that define what counts as allowable expenses for housing, transportation, food, healthcare, and other necessities. If your actual expenses match or exceed these standards and your income doesn’t cover both expenses and tax payments, you may qualify.

Common situations that lead to hardship status include job loss, serious illness or medical bills, caring for a sick family member, or other circumstances that significantly reduced your income or increased necessary expenses. Natural disasters, divorce, or business failure can also create hardship situations. The IRS looks at your current financial picture, not what caused the problem.

When you apply for hardship status, you need to provide detailed financial information. This includes income from all sources, monthly living expenses, bank account balances, assets like vehicles and property, and documentation supporting your numbers. The IRS will verify what you report, so accuracy matters.

If approved for Currently Not Collectible status, the IRS stops active collection efforts like wage garnishments and bank levies. Interest and penalties continue to accrue on your balance, and the IRS will review your financial situation periodically to see if your circumstances have improved. They can start collection activity again if your income increases.

Hardship status is not forgiveness. You still owe the debt. But it buys time when you genuinely cannot pay without sacrificing basic needs like housing, food, or medical care. For some taxpayers, it provides breathing room until an Offer in Compromise or payment plan becomes feasible.

Getting hardship status approved often requires negotiation with the IRS and proper presentation of your financial situation. An Enrolled Agent can represent you directly in these conversations and knows how to document your case effectively. The difference between approval and denial often comes down to how the information is organized and presented.

If you’re facing tax debt you cannot pay, talking to a Queen Creek area tax professional can help you understand your options before the IRS takes more aggressive collection action.