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BACK TAXES AND TAX DEBT

How long does it take to get an IRS payment agreement?

Jim Buttonow, CPA, CITP

SVP Post-Filing Tax Services

Updated on: July 07, 2022

If you owe back taxes and can’t pay, you’re not alone. In 2019, 16.8 million individual taxpayers owed the IRS. Each year, millions of taxpayers must get an installment agreement, extension to pay, or another, more complicated, IRS collection alternative to full payment.

How long does it take to resolve IRS back taxes?

In most cases, resolving a collection issue can range from a day (full payment or setting up an online payment plan) to 2 years (the amount of time the IRS has to make a decision on an offer in compromise). Most collection agreements are simple payment plans and don’t require much effort to arrange with the IRS. You can set up these agreements online or by filing a simple form with the IRS.

There are cases that may take longer to resolve. The IRS generally has 10 years to collect a tax debt (a period of time called the collection statute of limitations). Generally, when you won’t be able to pay your tax bill before the collection statute expires or when you owe more than $250,000, the time to resolve your issue will take longer than 2 years.

These more complicated situations usually involve more complex collection alternatives such as:

  • Partial-pay installment agreements: This is when the IRS may not collect all the tax you owe before the statute expires.
  • Currently not collectible status: This is when the IRS pauses collection on your bill because of financial hardship.
  • Offer in compromise (OIC): This is when you can settle your tax bill for less than you owe.

Disputes will add more time to resolve the issue, because you would have to provide the IRS with more information or request an appeal to set up the agreement you want.

Here are the completion times for various collection solutions:

Solution

Normal Time to resolve

Considerations

Simple IRS agreements (extensions to pay or streamlined installment agreements)

1-60 days

If you owe higher balances, the IRS may require you to pay by direct debit/payroll deduction, which can take longer to set up.

Complex IRS collection agreements (currently not collectible status, and agreements that involve determining your ability to pay)

30-180 days

You would need to provide detailed financial information to determine your ability to pay. The IRS will need to review and approve these special arrangements.

IRS offer in compromise (OIC)–doubt as to collectibility

4-12 months

If you owe less than $50,000 and don’t own a business, you can generally complete the OIC in less than 7 months. The IRS must complete 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 the IRS Collection Appeals Program, which can take up to 2 months to resolve.

Collection alternative appeal (currently not collectible status, installment agreement)

2-9 months

The IRS generally schedules CDP dispute appointments 8-10 weeks after you make the Form 12153 request. The average total appeal resolution time for CDP hearings is 8 ½ months.

The general rule

If you can pay within 6 years and owe less than $50,000, you can generally set up a payment plan in a matter of days, if you have filed your current and last 6 years of tax returns. You can set up an agreement by phone, or use the IRS online payment arrangement tool.

If you set up direct payments from your bank account or paycheck, you’ll have to wait about 6 weeks for the IRS to finalize these payment arrangements.

If you owe between $50,000 and $250,000, and can pay before the collection statute expires, you can also set up a payment plan quickly by phone. However, the IRS must approve this plan, which may add a few weeks to the agreement time.

It takes longer if you need to provide detailed financial information to the IRS (Form 433 series, with supporting documentation). Taxpayers with more complicated issues and those not in filing compliance (haven’t filed current and/or past 6 years of tax returns) face a much longer resolution time.

Lastly, taxpayers who qualify and submit an OIC face up to a year engaging with the IRS, depending on the complexity of their situation and the amount of tax they owe. In addition, taxpayers commonly appeal OICs, which adds months to the process.

Do you have additional questions?

For help 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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