IRS Hardship Status: Currently Not Collectible
Contrary to what collectors at the IRS may tell you, there is a hardship status available to you known as currently not collectible. Essentially, this means that the IRS agrees that you are financially unable to pay your tax debt at this time without it becoming a financial or economic hardship for you and they agree to forbear collections activity on your account.
To be clear, this does not do away with your tax debt. It simply means that the IRS is going to take some time off from pursuing your case. This can last for years and it is not uncommon for taxpayers who are placed in currently not collectible status to remain there until the collection statute of limitations passes.
Episode 2 of the Tax Problem Toolkit podcast was all about the currently not collectible status. The show notes for this post have lots of the details about the process.