Currently not collectible Status (hardship) 8/21/04
The IRS will "request" that you provide it with financial information and compare this information with the IRS collection standards. If you fail to respond the IRS will likely "encourage" you to respond by pursuing enforced collection.
If your financial information form indicates that your household cash flow available to live on does not exceed your "reasonable and necessary living expenses" (as determined by the IRS), the IRS will place you in "currently not collectible" (CNC) or "uncollectible" status. No payments are required and the IRS will not use enforced collection, e.g., levy your bank account or garnish your wages, BUT may file a tax lien.
Being placed in uncollectible status does NOT resolve your tax problem
The tax is still owed and interest and penalties continue to apply.
Uncollectible status is NOT (necessarily) permanent
The IRS may contact you (typically every two years) to update your financial information and see if you are able to pay the tax or enter into an installment agreement. If your financial status has not improved such as to indicate a monthly payment ability you can remain in uncollectible status.
If you do not file a return or pay taxes incurred after being placed in uncollectible status the IRS will take you out of uncollectible status and may use enforced collection.
If you remain in uncollectible status until the statute of limitations expires, the taxes will no longer be owed.