Now that you have an installment agreement, will it add to the IRS time to collect?
You have finally jumped through all the hurdles. You are riding high, you have finally resolved your case with the IRS, and entered into an official IRS installment agreement.
The bear is now off your back, and you have the IRS out of your hair. With your installment agreement, you can finally sleep knowing that you will not receive threatening IRS letters, calls from Revenue Officers, or worry about them clearing out your bank account.
But all of a sudden, a thought creeps into your head. You’ve heard about the IRS ten year collection time frame, and you wonder how close you are to the light at the end of the tunnel. You have done the right thing, but have your good intentions just ruined everything? Now that you have an installment agreement, will the collection date continue to run?
The good news is that entering into a payment plan does not extend the IRS time to collect.
The IRS has ten years from their assessment date to collect on a liability. There are several events, called “tolling” events that can extend the IRS’s time to collect on a liability.
The most common ways to toll the collection statute include:
- Submitting an Offer in Compromise – The clock is tolled when OIC is filed to the day it is either approved or rejected plus any time spent in appeals (remember, an OIC can take over 12 months to be investigated and decided)
- Filing for Bankruptcy – Extends the collection statute from when your case is filed to when it is dismissed (plus an additional six months are added by law)
- Requesting a Collection Due Process Hearing – From when your appeal is filed to the date until an appeals decision is made, plus any time spent in Tax Court.
- Filing an Innocent Spouse Claim – The clock stops when the claim is filed and ends when the case is resolved (Innocent Spouse claims can also take over 12 months so use caution.)
The simple reason behind these events stopping collection is during these events the IRS is prevented from collecting from you. The time the IRS has lost, for example, the 13 months you were in a bankruptcy, is given back to them. An installment agreement is different, and in a good way, the IRS is now collecting so that will continue to toll collection.
An installment agreement works for you as to the collection end dates. Every month you are getting closer to being done with the IRS. If you are unsure of your collection end date, the IRS has an information hotline for attorneys to call where they can secure your IRS records and confirm that your liability has expired or is close to expiring. This special line does not alert the IRS and will not add time to collect. As you read this, you could already be free from the IRS.