Currently Not Collectible Status

The test is whether paying the IRS would leave you unable to meet necessary living expenses. You provide a financial statement showing income, household costs, and assets, and the IRS measures your expenses against published allowances for housing, transport, food, and healthcare.

This is where preparation matters. The same household can look like it has money left over or nothing left over depending on how the expenses are presented and which ones the IRS is prepared to allow. Medical costs, dependant care, and court ordered payments are frequently understated by people filling the form in alone.

Levies and garnishments stop, and the IRS stops actively pursuing you. Interest and penalties continue to accrue, and the IRS may still file a federal tax lien to protect its position. The status is reviewed periodically and your income is monitored, so an improvement in your circumstances can bring the account back into collection.

The important detail is that the ten year collection period keeps running while you are in the status. For someone whose situation is unlikely to change and whose debt is already several years old, that can mean the balance expires without ever being paid.