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BACK TAXES AND TAX DEBT

How long does it take to get into an IRS collection agreement?

Jim Buttonow, CPA, CITP SVP Post-Filing Tax Services Published On September 09, 2021

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Millions of taxpayers each year cannot pay their taxes. In 2019, there were 16.8 million individual taxpayers who owed the IRS. Each year, between 4-5 million taxpayers have to get an installment agreement, extension to pay, or another more complicated IRS collection alternative to full payment.

This can be a time-consuming process.

How long does it take to resolve an IRS collection issue?

Resolving a collection issue can range from a day (full pay or setting up an online payment plan) to 2 years (the time in which the IRS has to make a decision on an offer in compromise-OIC). Most collection agreements are simple payment plans that require little documentation to arrange with the IRS. These agreements can be done online or by filing a simple form with the IRS.

The IRS generally has 10 years to collect a debt in a period referred to as the collection statute of limitations (CSED). As a general rule, whenever you propose that the IRS will not pay before the CSED expires or you owe more than $250,000, the time to resolve will extend beyond simple payment agreements and extensions to pay. These disputes usually involve more complex collection alternatives like partial pay installment agreements (where the IRS may not collect all tax owed before the statute expires), currently not collectible status (a hardship status where you don’t currently have to pay on your tax bill), and the offer in compromise (tax settlement).

Disputes will add more time to resolve collection alternative issues because taxpayers will have to provide additional information or request an appeal to obtain their alternative.

Time to resolve

Here are the completion times for various collection actions:

Action

Normal Time to resolve

Considerations

IRS simple collection alternatives (extensions to pay or streamlined installment agreements)

1-60 days

Higher balances owed can require direct debit/payroll deduction payment method which can take longer to set up with the IRS

IRS complex collection alternatives (currently not collectible, and agreements involving determining the taxpayer’s ability to pay)

30-120 days

Taxpayer financial information is required for agreements that require determining the taxpayer’s ability to pay. IRS will need to review and approve these special arrangements. Can lower time with complete information at the time of request.

IRS offer in compromise (OIC) – Doubt as to Collectability

4-12 months

Taxpayers who owe less than $50,000 without a business involved can generally be completed in less than 7 months. IRS must close all OIC proceedings within 24 months. Add an average of 8 months for an OIC appeal.

IRS offer in compromise (OIC) – Doubt as to Collectability

4-12 months

Taxpayers who owe less than $50,000 without a business involved can generally be completed in less than 7 months.  IRS must close all OIC proceedings within 24 months.  Add an average of 8 months for an OIC appeal.

Collection alternative appeal (currently not collectible, installment agreement)

2-60 days

Disputed collection arrangements require IRS manager intervention within 2 days. However, disputes can be made to IRS Collection Appeals Program which can take up to 2 months to resolve

Collection Due Process appeals

2-6 months

Collections CDP disputes appointments generally are scheduled 8-10 weeks after the Form 12153 request has been made. The average total appeal resolution time for CDP hearings is 8 ½ months.

The general rule

Taxpayers who can pay within 6 years and owe under $50,000 can generally set up a payment plan in a matter of days if they have filed their current and last six years tax returns. This can be done by phone or by using the IRS online payment arrangement tool.

Taxpayers who want or are required to set up direct payments from their bank account or employer face about a six-week wait for the IRS to finalize these payment arrangements.

Taxpayers who owe between $50,000-$250,000 and can pay before the CSED can also set up a payment plan quickly by phone.   However, this plan is subject to IRS approval, which may add a few weeks to the agreement time.

If the taxpayer needs to provide detailed financial information to the IRS (Form 433 series with supporting documentation), the time increases. Taxpayers with more complicated issues and those not in filing compliance face a much longer resolution time.

Lastly, taxpayers who qualify and submit an Offer in Compromise face up to a year engaging with the IRS depending on the taxpayer’s complexity and the amount owed. Many OICs are appealed adding months to the process.

Do you have additional questions?

For assistance creating a strategy to address your tax issue, visit Jackson Hewitt’s Tax Resolution Hub to see the various ways we can help you.

About the Author

Jim Buttonow, CPA, CITP, is the Senior Vice President for Post-Filing Tax Services at Jackson Hewitt. He’s been a leader in helping taxpayers and tax professionals resolve tax problems with the IRS, where he had worked for 19 years in various compliance-enforcement positions. Prior to his current role, Jim’s consulting practice focused on the areas of tax controversy and tax administration, which included leading product development on tax problem software for tax professionals, testifying before Congress, advocating for IRS transparency and efficiency, and proposing innovative large-scale solutions for taxpayers and tax professionals. Jim is also the author of Tax Problems and Solutions Handbook, a publication aimed at helping tax pros work more effectively in post-filing matters and resolving their clients’ most common tax problems.

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