Form 900 Collection Statute Waivers on Partial Payment Plans: When the IRS Can Ask and How Long

The IRS generally has 10 years from assessment to collect a tax. IRC 6502(a)(1). That date, the collection statute expiration date, is the most important number in a long payment plan, because a plan that runs past it collects nothing after it.

The same statute lets the IRS and the taxpayer agree in writing to extend that period in connection with an installment agreement. IRC 6502(a)(2)(A). The form is Form 900, Tax Collection Waiver. The IRS's own policy limits when it may ask, and those limits are worth knowing before anyone puts a Form 900 in front of you.

The policy: partial payment plans only

IRM 5.14.1.2 states the rule plainly. Although IRC 6502(a)(2)(A) permits extensions in connection with installment agreements, it is IRS policy that collection statute extensions are permitted only in conjunction with partial payment installment agreements and only in certain situations. IRM 5.14.2.3 repeats it: do not secure waivers on non-PPIA agreements. Form 900 will only be executed in connection with partial payment agreements.

So if you are setting up a Simple Payment Plan, a guaranteed agreement, or a non-simple agreement that pays in full before the statute runs, there is no waiver. And under IRM 5.14.2.3, the IRS limits the length of installment agreements to the 10-year statutory period except in connection with partial payment agreements.

Even with a partial payment plan, only in certain situations

IRM 5.14.2.2.3 says a waiver should be considered with a partial payment agreement where there is an asset that will come into the taxpayer's possession after the statute expires, and liquidating that asset offers the best resolution, instead of liquidating existing assets to partially pay the liability. The IRM's two examples:

• A taxpayer is the beneficiary of a trust that pays monthly distributions funding the plan, but will not be entitled to the trust principal for two more years. The statute expires in one year. The only other asset is a home whose equity cannot be borrowed against. The taxpayer agrees to extend the statute and liquidate the trust in two years.
• A corporation owns land under development that will be completed in two years and then sold at a much higher value. The statute expires in one year. Seizing the land and equipment now would not significantly reduce the debt and would stop the development. The officers agree to extend the statute.

The IRM is equally clear about when a waiver is not needed. A waiver is no longer required when the taxpayer's only ability to satisfy the liability after the statute expires is continued payments under the agreement, and the two-year financial review shows no significant change. Its examples: a taxpayer owing $1,800 who can pay $100 a month with 12 months left on the statute; a taxpayer owing $10,000 who can pay $200 a month with three years left. Both get partial payment agreements with no waiver, and the statute is allowed to expire.

The limits on length

IRM 5.14.2.3 caps extensions at five years beyond the original collection statute expiration date, including any prior statutory suspensions, plus up to one year for administrative actions. If a taxpayer enters into more than one partial payment agreement, the statute may be extended with each, but the total extension for each balance cannot exceed five years from the original date, plus the additional periods the IRM describes.

The IRM's example: a tax assessed May 10, 2010 has an original expiration date of May 10, 2020. A bankruptcy from January 5, 2011 to January 5, 2014 suspends the statute for those three years plus six months, moving the date to November 10, 2023. A six-year extension with a partial payment agreement then moves it to November 10, 2029.

Extensions are calculated module by module, using one of two methods described in IRM 5.14.2.3: separate dates for each period, or one common date for all periods, either way with no extension longer than five years plus one.

Prior suspensions do not count against the five-year cap. IRM 5.14.2.3 says suspensions of the statute because of offers in compromise or legal proceedings do not bar an extension with a partial payment agreement and do not change the length allowed, so a statute that was suspended for a pending offer can end up later than the five-plus-one calculation alone would suggest.

When a waiver can and cannot be signed

• Only at the start of a new partial payment agreement. IRM 5.14.2.2.3 says the waiver can only be secured at the inception of the agreement, not during the two-year review, unless a new agreement is executed then.
• Not with a reinstatement. IRM 5.14.2.2.3 says a waiver should not be obtained when a partial payment agreement is reinstated, and IRM 5.14.11.5 says waivers secured with reinstatements of existing agreements will not be approved.
• Not during an agreement. IRM 5.14.2.3 says collection statutes may not be extended during installment agreements, only in connection with new partial payment agreements after a default notice, during the default period if a new agreement is entered (not a reinstatement), or after termination.
• Not on individual shared responsibility payments under the Affordable Care Act, which the IRM excludes from waivers.

Your right to refuse, and what it costs

IRM 5.14.2.3 tells employees to notify taxpayers that they have the right to refuse to sign a waiver. That right is real. It also has a consequence the IRM states in the next breath: if an installment agreement request is being considered and the taxpayer refuses to sign a waiver, the taxpayer is told the request will be considered and recommended for rejection, and the case goes to the independent administrative reviewer.

That means refusal does not end your rights. It moves the dispute into independent review, and from there to appeal. See rejection and independent review. If the IRS asked for a waiver in a situation the IRM does not support, for example on a plan without a future asset, or with a reinstatement, that is a strong argument for the reviewer and for Appeals.

The IRM also contemplates a taxpayer who refuses a waiver even though a significant improvement in finances is foreseeable. Its instruction is not to force the issue but to grant the partial payment agreement, note the likely improvement in the case history, and consider it during the two-year review. See the two-year review.

How long a signed waiver lasts

A waiver signed with an installment agreement extends collection until 90 days after the agreed date. IRC 6502(a)(2)(A) says levy or court proceedings may be started prior to the date which is 90 days after the expiration of any period agreed upon in writing at the time the agreement was entered into. IRM 5.14.2.3.2 adds that these waivers remain in effect regardless of whether the agreement pays the tax in full and regardless of the length of the extension, citing Treas. Reg. 301.6502-1(b)(1).

Older waivers have a different history. The IRM notes that collection statute extensions obtained before January 1, 2000 that were not secured with installment agreements expired on December 31, 2002, or at the end of the original 10-year period if later, under section 3461(c)(2) of the IRS Restructuring and Reform Act of 1998.

Approval and paperwork

Partial payment agreements that extend beyond the original statute date require group manager approval, and the manager approves the Form 900 and the agreement on the same date, under the delegation of authority described in IRM 5.14.2.3. If a waiver is part of your agreement, ask for a copy of the signed Form 900 with the extended dates for each period, and keep it with the agreement.

The collection statute is the clock that ends every IRS debt. Extending it is a serious decision. Under current IRS policy, you should only be asked in a narrow set of cases, with a partial payment plan, and with a clear reason tied to an asset you will receive later. If that is not your situation, ask why the waiver is being requested.