The idea is to get the IRS to back off long enough so that the IRS’s time to collect expires. The IRS gets zilch, and that’s what you desire. The tax balance, interest, and penalties are wiped out.
Keep in mind that while you are in uncollectible status, interest continues to add up. For this reason it is critically important that you and your tax attorney calculate the collection limits and make a determination whether the uncollectible status will be temporary or permanent. Again, even if uncollectible status is temporary, it can ideally position the permanently resolve the tax problem using other methods, like the offer in compromise or bankruptcy.
Get a free copy of the Faith Firm book, How to Get Tax Forgiveness. It will shed some more light on solving tough tax problems using hardship and other tax solutions.