TC 489: Installment Defaulted

What the code actually does

TC 489 updates a module (the IRS’s record for one tax period within the account) to collection status 21 when the deferral TC 488 established defaults. Doc 6209 §8A titles the code itself "Installment Defaulted" and states that on posting it "[u]pdates module status to '21', delete[s] any deferred action to issue CP 191 and go[es] through TDA/BAL DUE analysis" — meaning the module re-enters the standard delinquent-account review that TC 488 (status 14) had suspended. The same reference marks TC 489 "B" — Business Master File only; it cannot post to an individual taxpayer’s Form 1040 account.

The one use this page can document from live IRM text: IRM 5.5.7.6.2 describes TC 489 as the date a Form 706 estate’s IRC 6166 election — a deferral of estate tax attributable to an interest in a closely held business — goes into default. Some transcript references describe TC 489 more generally, as the default of whatever standard Installment Agreement a business or individual client negotiated. Doc 6209’s own File-column marking rules that reading out for individual accounts entirely, and no live IRM source located here documents TC 489 defaulting anything other than the IRC 6166 deferral. Treat a TC 489 on a transcript as evidence that a status-14 deferral broke down, not evidence about a Form 9465 or Form 433-D payment plan, which defaults through an entirely different mechanism (IDRS (the IRS’s Integrated Data Retrieval System) status 64, not TC 489).

Why a client sees this after TC 488, not before it

A transcript moving from TC 488 to TC 489 means the module was in a deferred posture and fell out of it — the module re-enters TDA/BAL DUE (delinquent-account) processing, with the CP 191 deferred action Doc 6209 references removed from the pipeline. It is not itself a new assessment or a separate penalty; it is the system’s own record that the deferral is no longer in effect as of that date.

For the IRC 6166 estate-tax case specifically, IRM 5.5.7.6.2 lists the corroborating IDRS history to ask the IRS about alongside the TC 489 itself: a transaction-history entry reading "Default 6166" or "950-H Letter," in addition to the TC 489 date. The earlier the practitioner addresses a default, the more options remain before the account moves further into standard collection.

The statute rule — suspended, then resumes

This is the point most likely to get inverted. IRC §6503(d) suspends the collection statute "for the period of any extension of time for payment granted under the provisions of section 6161(a)(2) or (b)(2) or under the provisions of section 6163 or 6166," and IRM 5.5.7.6.2 confirms the statute was suspended for the full tax liability the entire time the election was in effect when all the tax was deferred (IRM 5.5.7.6.2.2 covers a partial election, which leaves two CSEDs) — from the original TC 150 assessment date, not from the TC 488 date. TC 489 is what ends that suspension: "the statute suspension ends when the TC 489, Installment Defaulted, indicator is input on IDRS. The running of the statute resumes the day after the TC 489 date." The IRM’s own example makes the arithmetic concrete: a TC 150 assessment of $300,000 on 9/20/2018, a TC 488 on 10/2/2018, and a TC 489 on 11/5/2020 suspends the statute across that entire span; the new CSED then runs a full ten years from 11/6/2020, landing on 11/6/2030 — not ten years from the original assessment. A full ten years remain only because the suspension began at assessment, before any collection time had run.

The practitioner’s actual next step

Confirm this is actually an IRC 6166 case before applying the rule above — check the client's Form 706 file, or ask the IRS whether the IDRS history shows a payment-indicator flag restricting the account (PYMT-IND>1) or a "6166 SETUP," "To 6166," or "Default 6166" entry, and confirm the module is a Form 706 (or, less commonly, another BMF form Doc 6209 allows into status 14). This code cannot appear on an individual Form 1040 module, and it is not evidence of a defaulted Form 9465 or Form 433-D Installment Agreement, which uses IDRS status 64 instead.

Recompute the CSED by hand for this mechanic: treat the span from the TC 150 (or later TC 290/300) date to the TC 489 date as fully suspended, then count a fresh ten years from the day after TC 489 when all the tax was deferred. The Federal Tax Desk’s CSED Calculator does not currently model the IRC 6166/6161 estate-tax tolling category, so do not run an estate account with this pattern through it expecting a correct answer — its tolling categories cover the standard OIC, bankruptcy, and Installment Agreement events, not this one.

Review the account transcript the client supplies from the TC 489 date forward to see what the IRS has done since — for estate-tax specifics, IRM 5.5.7.6.2 names Campus Estate & Gift and the Advisory Estate Tax Lien Group as the actual IRS contacts, along with Form 4349, Computation of Estate Tax Due with Return and Annual Installment, as the document that shows how much tax was deferred versus not.

If the underlying circumstance that caused the default is still live — the estate lacks liquidity, a closely held business interest hasn’t been sold, or similar — evaluate the estate’s options with Campus Estate & Gift directly rather than assuming a standard IA renegotiation process applies; it does not.

What people mistake TC 489 for

TC 489 and TC 488 are the pair most likely to be read together, since both relate to the same deferral lifecycle and can appear close together on the same transcript. TC 488 (status 14) reflects the deferral in force; TC 489 (status 21) reflects that deferral defaulting and the collection statute resuming. Critically, the statute behaves oppositely across the pair from what a standard Installment Agreement would suggest: it was suspended while TC 488 was in effect and resumes the day after TC 489 posts (a fresh ten years when all the tax was deferred).

TC 489 is also worth distinguishing from the ordinary defaulted Installment Agreement, IDRS status 64 ("Defaulted Installment Agreement — Generated when CC IADFL is input ... or whenever an Installment Agreement is defaulted," per Doc 6209 §8A). That status applies to both individual and business accounts under the standard Form 9465/433-D program; TC 489 does not, and cannot appear on an individual account at all. Seeing "installment" and "defaulted" together on a transcript is not enough to tell which of the two a client is looking at — the master-file type and the actual transaction code matter.

TC 489 is also distinct from TC 530 (Currently Not Collectible). TC 530 reflects a hardship determination the IRS made independent of any deferral election. TC 489 reflects a specific IRC 6166 election failing on its own terms — a materially different history to explain to an estate’s executor.