There was a time when the IRS could ask a taxpayer to extend the collection statute for almost any reason, as often as it liked. Congress ended that practice in the IRS Restructuring and Reform Act of 1998. Today the IRS can get a written extension of the ten-year collection period in only two situations, and its own manual narrows one of them further.

The form is Form 900, Tax Collection Waiver. This guide covers when the IRS can ask for it, what it does and how to think about signing.

What the statute allows now

Section 6502(a)(2) permits collection after the ten-year period only in two circumstances.

  • Installment agreements. If there is an installment agreement between the taxpayer and the IRS, collection may continue until 90 days after the expiration of any period for collection agreed upon in writing at the time the installment agreement was entered into.
  • Levy releases. If there is a release of levy under section 6343 after the ten-year period, collection may continue until the expiration of any period agreed upon in writing before the release.

The statutory amendment notes to section 6502 show the 1998 change. Congress struck the former sentence that allowed the agreed period to be extended by later agreements and rewrote paragraph (2) into its current form, applicable to requests to extend made after December 31, 1999.

How the IRS limits it further

IRM 5.1.19.3.5 says Form 900 is executed only in connection with granting a partial payment installment agreement, and only in certain situations. It states that IRS policy limits a Form 900 to no more than five years, plus up to one year to account for changes in the agreement. It also notes that before July 2005, IRS policy permitted extensions with all installment agreements.

IRM 5.14.2.2.3 gives the details. Revenue officers are told to consider securing a waiver with a partial payment agreement where an asset will come into the taxpayer's possession after the CSED and liquidating that asset offers the best resolution, rather than liquidating existing assets. The manual says a waiver is no longer required when the taxpayer's only ability to pay after the CSED is continuing the installment payments and there is no significant change in ability to pay identified through the two-year financial review.

The same section says the waiver can only be secured at the inception of the partial payment agreement, not during the two-year review, unless a new agreement is executed then, and that a waiver should not be obtained when an agreement is reinstated. It also instructs employees not to secure waivers on installment agreements other than partial payment agreements.

What the IRM examples show

IRM 5.14.2.2.3 includes examples that make the policy concrete. In one, a taxpayer will receive trust principal two years from now, but the collection statute will expire in one year; the only other asset is a home with modest equity. The revenue officer secures a two-year waiver so the trust can be liquidated later, instead of pursuing the home now.

In another, a taxpayer with no assets can pay a small monthly amount, and the statute will expire in twelve months. The manual says to grant the partial payment agreement for twelve months, with no waiver, and let the statute expire.

The pattern is clear. A waiver is meant for situations where there is a specific future source of payment that the IRS would otherwise try to reach now. It is not supposed to be a routine add-on to every partial payment plan.

What happens with old waivers

Some accounts still carry waivers signed before 2000. IRM 5.1.19.3.16 describes the transition rule from the 1998 Act. A waiver secured in connection with an installment agreement expires 90 days after the date specified in the waiver. A waiver that was not obtained at the same time as an installment agreement expires no later than December 31, 2002, or the end of the original collection statute, whichever is later.

If an old waiver is the reason the IRS says a balance is still collectible, check it against that rule. Many of those waivers no longer extend anything.

Waiver versus suspension

A waiver is different from a suspension. A suspension happens by operation of law when a qualifying event occurs, such as a pending offer or a bankruptcy. The guide on what suspends the collection statute lists those events. A waiver is an agreement. It does not happen unless you sign.

IRM 5.1.19.3.16 describes the effect of a waiver signed with a partial payment agreement: the collection statute is suspended for the period agreed in writing, and the suspension lasts for an additional 90 days after that period. That tracks the 90-day tail in section 6502(a)(2)(A).

Should you sign?

Signing a Form 900 gives the IRS more time to collect. The question is what you get in exchange. If the alternative is an immediate levy on an asset you need, or a forced sale at the wrong time, a short, specific extension tied to a real future payment source may be the better deal. If the IRS has no realistic way to collect before the statute runs, signing gives away time for nothing.

Look at the length. The IRM caps the IRS's request at five years plus one. A shorter period tied to the actual event, such as a trust distribution or a property sale, is better than the maximum.

Look at the scope. Make sure the waiver lists only the periods that need it. Do not extend balances that are about to expire on their own if they are not part of the payment plan.

And look at the timing. Under the manual, a waiver is secured at the start of a partial payment agreement. If you are asked to sign one at a two-year review or on reinstatement, ask why, because the IRM says that should not happen unless a new agreement is being executed.

How it fits with the bigger picture

A partial payment agreement is often the best fit for someone who cannot pay in full before the collection statute runs. The payments continue, the clock keeps running while the agreement is in effect and the balance remaining at the CSED expires. A waiver changes that math by moving the finish line. For planning in the last stretch, see the guide to strategy near the CSED.

For the menu of installment options themselves, the library article on IRS payment plan types is a good reference.

Questions to ask before you sign

  • What is the current CSED for each period the waiver would cover, counting any suspensions?
  • What specific future payment source justifies the extension, and when will it arrive?
  • Is the agreement a partial payment installment agreement being set up now, as the IRM requires?
  • Is the length tied to the payment source, or is it the maximum?
  • Which periods are listed on the form, and do all of them need to be there?
  • What will the IRS do if I decline, and is that realistic before the CSED?

The bottom line

Since 2000, the ten-year collection period can be extended by agreement only in connection with an installment agreement or a levy release after the CSED, under IRC 6502(a)(2). IRS policy in IRM 5.1.19 and 5.14.2 limits Form 900 to certain partial payment agreements, at inception, for no more than five years plus one. Pre-2000 waivers are limited by the transition rules.

A waiver is a choice, not a formality. Make it for a reason.