Once the IRS deems the account uncollectible, letter 4223 or 4624C will be mailed to you. The letter states: “Case Closed — Currently Not Collectible.” The letter states the type of tax and the periods that are temporarily closed due to hardship. The letter states that the government may reopen the case in the future if the taxpayer's financial condition improves. Interest and penalties will continue to accrue.
When you get this letter, the IRS will update their computer database and call off the dogs. It’s wise to obtain IRS account transcripts confirming a line item reading “Case Currently Not Collectible.”
Keep in mind that hardship status can be permanent or temporary. After being classified as uncollectible, the IRS will once a year review your financial condition to determine if it has improved. Even if uncollectible status is temporary, it can ideally position you to work out a long term tax solution.
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 uncollectible status and other solutions.