What is a Temporary Delay of Collection and Do I Qualify for It?

Taxpayers who don’t pay their taxes in full when filing their returns and who don’t qualify for an extension can expect to receive a bill from the IRS for the amount owed. The collection process officially starts upon receipt of this bill, which means that interest and penalties on that amount will continue to accrue until the account is satisfied or the parties enter into a payment plan. In some cases, however, taxpayers can apply for a temporary delay of collection, which, if granted, will delay collection until the taxpayer’s financial condition improves, although interest will still continue to accrue until the amount is paid in its entirety. Read on to learn more about temporary delays of collection and whether you and your family could qualify for one.

Qualifying for a Temporary Delay of Collection 

When the IRS determines that a taxpayer simply cannot pay any of his or her tax debt, even in accordance with a payment plan, it may mark the account as “currently not collectible” and temporarily delay collection. This doesn’t mean that the debt is erased, only that the agency has deemed a taxpayer unable to pay off the debt for the time being. Before approving a request for a temporary delay, the IRS will require a taxpayer to:

• Complete Form 433, a Collection Information Statement; and
• Provide proof of financial status, including information about assets and monthly income and expenses.

If approved, the temporary delay will go into effect immediately, protecting the taxpayer’s assets from seizure and his or her wages from garnishment. It’s important to note that even if the IRS does delay collection, the taxpayer’s debt will continue to increase due to the accrual of penalties and interest.

Alternatives to a Temporary Delay of Collection 

Because penalties and interest continue to accrue on unpaid tax debts, even when a temporary delay has gone into effect, taxpayers who cannot pay all of their debt at once should still consider one of the following options:

• Obtaining a cash advance on a credit card or obtaining a bank loan, the rates and fees for which may be lower than what the IRS charges in interest and penalties;
• Applying for a payment plan, such as a short-term plan, which gives taxpayers an extra six months to pay off their debt, or an installment agreement, which allows taxpayers to pay their debt off monthly; or
• Applying for an Offer in Compromise, which allows taxpayers to resolve their debt to the IRS by paying an agreed-upon, reduced amount.

For help determining whether you qualify for any of these tax debt repayment options, please reach out to our legal team today.

Our Florida Tax Attorneys are Ready to Help 

Obtaining approval for a temporary delay of collection can go a long way towards helping taxpayers pay off their IRS debt more easily. To learn more about this process, please call CPA, former FBI Special Agent, and experienced Florida currently not collectible status attorney Ronald Cutler, P.A. or reach out to our legal team via online message.

Sources: 

irs.gov/businesses/small-businesses-self-employed/temporarily-delay-the-collection-process

irs.gov/taxtopics/tc201