An Overview of the IRS Tax Collections Process for Non-Tax Lawyers
17. The 120 Day Extension to Pay
The next method for resolving IRS liability is the 120-day Extension to Pay. The IRS particularly if the client has a wonderful compliance history will grant an automatic 120-day Extension to Pay.
You can get this simply by calling ACS or writing in. We recommend you call ACS in saying, “My client intends to pay fully. But we need a little bit of time. Can we get 120 days?” Generally, if you don’t ask for 120 days then we won’t give you 120 days. So, make sure you say, “I want a 120 days.”
Again, when you’re dealing with ACS agents, a lot of times they are not being most taxpayer-friendly. You want to make sure you ask for your 120 days.
However, what the IRS doesn’t tell you is even though a 120-day Extension is granted for you automatically, there may be ways to buy your client a little bit more time.
For example, if you call ACS and you say, “My client is going to pay you but we need 30 days to pay it off. Can you give me a 30-day collection hold?” The IRS will say, “Great. That will give a 30-day collection hold.”
And the day on the 30th day, you should go, “You know, IRS, we really like another 30 days.” The IRS agent, depending on how they feel, will say, “Okay, we’ll give you another 30 days.”
At the end of 30 days, then you can call the IRS and say, “Hey, we’re going to be ready to pay in full. We just need a 120 days to do it.”
The IRS says, “Okay. I’ll give you your 120-day extension.”
So, you can only use the 120-day extension once but by adding collection holds before you actually triggered the 120-day extension you may be able to buy your client more time to pay the IRS off.
Now, keep in mind during this period of extending collections, interests and penalties will continue to accrue. But, at least you are avoiding the threat of any collection action or any levies which is really, really important.
Keep that in mind that things are highly negotiable within that 120-day window.