IRS Hardship Deferral — Temporary Relief for Businesses — Definition Glossary

Defined by Sarah Mitchell, CPA | Reviewed by: James Okafor, EA | Updated May 2026

Full Definition

An IRS hardship deferral (distinct from Currently Not Collectible status) is an informal arrangement where the IRS temporarily suspends collection action while a business resolves a short-term cash flow crisis — typically lasting 30 to 60 days. Hardship deferrals are not a formal IRS program; they are discretionary decisions made by IRS Revenue Officers or ACS representatives based on documented temporary financial hardship. To obtain a hardship deferral, the business must demonstrate: (1) the financial crisis is genuinely temporary (not a long-term inability to pay), (2) the business is actively taking steps to restore financial stability, and (3) the business is current on new payroll tax obligations (not pyramiding). Hardship deferrals are not publicly advertised and must be requested directly from the assigned IRS employee. They do not stop interest and penalties from accruing and are rarely granted for businesses with large 941 tax debt unless the business shows credible evidence of an imminent payment source.

Why This Matters for Businesses With Tax Debt

Understanding IRS Hardship Deferral — Temporary Relief for Businesses is essential for any business owner navigating IRS enforcement or business tax debt. This term directly affects the resolution options available — including whether tax debt financing is a viable solution, how federal tax liens affect the business, and what the IRS can legally collect.

Related Tax Terms

• Currently Not Collectible
• IRS Revenue Officer
• Payroll Tax Pyramiding

Is Your Business Facing This Situation?

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Type of Tax Debt *-- Select Tax Debt Type --IRS 941 Payroll Tax DebtFederal Tax LienIRS Bank Levy (Active Now)Trust Fund Recovery Penalty (TFRP)State Tax DebtOIC Bridge FinancingMultiple Types

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Sources: IRS.gov; Internal Revenue Code (IRC); IRS Publications 1, 594, 1660, 594. Tax Funds is a financing marketplace — not a lender, CPA firm, or law firm. Content is for informational purposes only and does not constitute tax or legal advice.