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IRS “Expanded” Installment Agreement

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When a person owes the IRS money that they can’t pay in full, they typically will qualify to deal with the debt via a payment plan.  This payment plan is called an “installment agreement” in IRS terminology.  Simply stated, an installment agreement is a contract with the IRS to pay the taxes you owe within an extended time frame.  There are many types of installment agreements, but two of the most common are the guaranteed and streamlined variety.

Guaranteed & Streamlined Installment Agreements
We discuss the guaranteed installment agreement at length in this blog post.  But what exactly is a streamlined installment agreement?  For individual taxpayers who have filed all required returns and have an assessed balance of tax, penalties and interest of $50,000 or less, they can enter into an installment agreement with “relaxed” criteria.  Basically, they don’t have to go through as many hoops or submit as much documentation.  The following criteria apply to those who wish to apply for a streamlined installment agreement:

  • Payment Terms  Up to 72 months – or – the number of months necessary to satisfy the liability in full by the Collection Statute Expiration Date (CSED), whichever is less
  • Collection Information Statement (financials) Not required.
  • Payment Method Direct debit payments or payroll deduction is preferred, but not required.
  • Notice of Federal Tax Lien
    • Determination not required for assessed balances up to $25,000.
    • Determination is not required for assessed balances of $25,001 – $50,000 with the use of direct debit or payroll deduction agreement.  If taxpayer does not agree to direct debit or payroll deduction, then they still qualify for Streamlined IA over $25,000, but a Notice of Federal Tax Lien determination will be made.

The criteria discussed above also apply to business taxpayers, but only for income tax debts up to $25,000.

So what if you owe more than $50,000 as an individual or $25,000 as a business?  Well, this is where the “expanded installment agreement” comes into play.

Expanded Installment Agreements
From late 2016 through late Fall of 2018, the IRS tested “expanded” criteria for the streamlined processing of taxpayer requests for installment agreements.  During the test, taxpayers who owed more than $50,001 but less than $100,000 were allowed to use most of the criteria outlined under the streamlined installment agreement.  Well, based on test results, the expanded criteria for streamlined processing of installment agreement requests were made permanent.  If you are a practitioner, you can find the “new” criteria in IRM 5.19.1.6.4.11 (09-26-18 update).

So, for individual taxpayers who have filed all required returns and have an assessed balance of tax, penalties and interest between $50,001 and $100,000, you can use the following criteria to apply for an expanded installment agreement:

  • Payment Terms Up to 84 months – or – the number of months necessary to satisfy the liability in full by the Collection Statute Expiration date, whichever is less
  • Collection Information Statement (financials) Not required if the taxpayer agrees to make payment by direct debit or payroll deduction
  • Payment Method Direct debit payments or payroll deduction is not required; however, if one of these methods is not used, then a Collection Information Statement is required.
  • Notice of Federal Tax Lien
    • Determination is required.

The criteria discussed above also applies to all out of business sole-proprietorship debts between $50,001 and  $100,000.

Do you owe the IRS and need to enter into a resolution option?
Check out this page of our website where you can receive our special report entitled 5 Questions To Ask Any Tax Resolution Firm Before Paying Them A Dime, a comprehensive 30-minute Tax Debt Settlement Analysis AND your personalized Tax Resolution Plan (a package valued at $175, but FREE to you for a limited time).  You can also visit this page to read about how you can find out the date (i.e. CSED) the IRS will write off your tax debt!

Tax Debt and 10 Year Statute of Limitations

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Many taxpayers, and some practitioners, are unaware that the Internal Revenue Service (IRS) by law only has 10 years’ time to collect a tax debt.  This is referred to as the statute of limitations or in IRS speak, the Collection Statute Expiration Date or CSED for short. This post will talk about what the CSED is, how to obtain it, what can change its date and how to stop paying taxes once it expires.

How Long Can the IRS Collect a Debt?
Per Internal Revenue Code (IRC) Section 6502, the limit on the IRS’ ability to collect a debt is 10 years. However, as we discuss below, most of the “popular” legal methods used to deal with tax debt also stop the CSED “clock” from running. In some cases it actually makes more sense for the taxpayer to just let the clock run.

When Does the Clock Start?
The 10-year period begins to run with the date of the “assessment” of the tax, not the tax year for which taxes are due. For example, if a return for 2012 is not filed until 2014 and the tax is assessed in 2014, the 10-year period begins to run in 2014 and expires in 2024.

The date of assessment is the date the tax liability is assessed on a particular form at an IRS Service Center. When the applicable form is signed by an IRS official, the 10-year period for that tax liability starts to run. When interest and late payment penalties (as well as other penalties) related to that tax year are tacked onto the underlying tax debt, they too must be collected within the same 10-year period.

If you never filed a tax return, but the IRS filed one for you (i.e. using a Substitute for Return or SFR), then the statute of limitations began to run whenever that assessment was processed by the IRS on your behalf.

How Can I Find Out My CSED?
To determine when the CSED began for a particular liability, the best approach is to obtain a transcript of the taxpayer´s IRS account. Transcripts should exist for each tax year and provide basic information such as the date of assessment, date of filing, and tax liability.

Taxpayers can request account transcripts on their own behalf by filing IRS Form 4506-T or requesting them online.  You can then attempt to analyze the data, perform the necessary calculations and hope you arrive at the correct answer.

Another method of calculating the CSED is to look at the “Date of Assessment” for a particular tax period if you have received IRS Form 668 (Y)(c) – Notice of Federal Tax Lien.  You would then calculate out approximately 10 years from this date to see when the CSED expires.

My Tax Debt Is Older Than 10 Years But The CSED Hasn’t Elapsed. Why?
While the IRS only has ten years to collect a debt, there are certain factors that can extend or pause the CSED. This is known as “tolling the statute of limitations.” Events that stop or “toll” the statute of limitations include:

  • Filing Certain Appeals – in most cases, the statute also doesn’t run the entire time an IRS Appeal is pending.
  • Filing an Offer in Compromise (OIC) – the statute of limitations does not run the entire time your Offer is under review, including any Appeals that you exercise, plus an additional 30 days.
  • Filing a Lawsuit Against the IRS – the statute of limitations does not run while litigation against the IRS is pending.
  • Filing Bankruptcy – the statute of limitations does not run the entire time you are under the protection of the bankruptcy courts or for the six months following the discharge or dismissal of the bankruptcy.

If you exercised any of these options in the past, there was probably a period of time when the statute was not running.  Said another way, during any time period in which the IRS is legally unable to pursue you for collection of the debt, the statute of limitations is not running.  For a complete list of tolling events and the associated time, check out IRS Publication 594 and look at “How Long We Have To Collect Taxes.”

Will the IRS Notify Me Once the CSED Elapses?
No, the IRS is not required to notify you once the debt has expired.  However, they are not legally allowed to pursue collection of the debt.  Thus, you will usually just stop hearing from them if your debt has expired.

My CSED Has Elapsed – Now What?
If the CSED has elapsed, congratulations! All that remains is cleaning up the chaos that your tax problem left in your life. You will need to ensure that a TC 608 credit to zero out the debt has been entered into the IRS system. You should also ensure that a Release of Federal Tax Lien is filed so that you can begin the process of repairing your credit.

My CSED Has Not Elapsed – Now What?
If your CSED hasn’t elapsed, but it is getting close, the best thing to do might be to get a plan in place with the IRS to ensure you’re protected from aggressive collection action.  This may include entering into a monthly payment plan or negotiating for your account to be placed into currently not collectible status (a “temporarily” status where you aren’t required to pay the IRS).

Do YOU Need Help With Your IRS Debt?
While you could go through the hassle of calculating your CSED, do you really want to?  For a flat $75 fee, and us filing a few forms with the IRS (with your consent), we’ll look at however many years you want to analyze, and provide you with a comprehensive report that will include:

  • Total tax assessment, penalty, interest and accrual amounts for each year (so you know how much you really owe)
  • CSED calculations for each year requested
  • Tolling events (if any) and the days your CSED has been extended
  • All IRS notices sent/received for each year
  • IRS account activity by year
  • And much, much more (we promise)

Call us at (773) 239-8850 or click our email address at the bottom of this screen to get started.

By the way, this post (the one you’r reading) is by far the most viewed on our site.  Why?  Because many people have tax issues that they want to resolve.  If you have old tax returns that need to be filed or want to learn how a professional can help you with your situation, why not visit our sister site File Old Tax Returns?  You might be surprised to learn that we may be able to help you out for less than you are thinking.  Plus, hear some valuable information on your taxpayer rights from the IRS Commissioner himself!