Section 1. Securing Installment Agreements

5.14.1  Securing Installment Agreements

• 5.14.1.1   Overview
• 5.14.1.2   Installment Agreements and Taxpayer Rights
• 5.14.1.3   Identifying Pending, Approved and Rejected Installment Agreement Proposals on IDRS
• 5.14.1.4   Cases Received From ACS or Campuses
• 5.14.1.5   Interest-Based Interviews:Installment Agreement Acceptance and Rejection Determinations
• 5.14.1.6   Levy Restrictions and Installment Agreements

5.14.1.1  (07-12-2005) 
Overview

1. Installment Agreements are arrangements whereby the Internal Revenue Service allows taxpayers to pay liabilities over time. If full payment cannot be achieved by the Collection Statute Expiration Date, and taxpayers have some ability to pay, Partial Payment Installment Agreements may be granted. During the course of agreements, penalty and interest continue to accrue. No levies may be served during installment agreements.
2. The terms "delinquent taxes," "accrued taxes," and "current taxes" are used in this manual. They are defined as follows:
1. Delinquent Taxes: balance due, ACS balance due accounts and/or notice status accounts;
2. Accrued Taxes: unassessed amounts due on returns or undeposited FTDs as of the date of contact; and,
3. Current Taxes: FTDs and amounts which become due after the date of contact.
3. Taxpayers should be encouraged to pay the liability in full to avoid the costs of an installment agreement which include a user fee, accrual of penalties and interest, and the possible filing of a Notice of Federal Tax Lien.
4. In addition to the policies and procedures provided in sections 1 – 12 of this chapter, the following IRM chapters, sections and sub-sections provide procedures on installment agreements for specific functions within the Internal Revenue Service:
• IRM 4.20 (Examination);
• IRM 5.19.1.5.4 (Campuses, ACS, toll-free);
• IRM 8.7.2 (Appeals); and,
• IRM 13.1.7 (Advocate)

Section 6 of this chapter titled Multi-functional Installment Agreements also contains guidance for other functions.

5.14.1.2  (07-12-2005) 
Installment Agreements and Taxpayer Rights

1. Prior to discussing taxpayers’ ability to pay a liability, ensure they have received Publication 1: "Your Rights as a Taxpayer, " and Publication 594: "What You Should Know About The IRS Collection Process."
2. Request full payment of the tax liability. Encourage the taxpayer to pay off the tax liability as quickly as possible. If the taxpayer cannot pay the liability in full, encourage them to pay within 120 days (See IRM 5.14.5.5). If taxpayers are unable to pay in full, conduct interest-based interviews. (See IRM 5.14.1.5)
3. Request some payment from the taxpayer. Taxpayers may be required to make a payment (see IRM 5.14.1.5(6)) or payments (see IRM 5.14.3.1) while securing documentation to determine the proper disposition of accounts.
4. When taxpayers are unable to pay a liability in full, an installment agreement (IA) should be considered.
5. Taxpayers with individual income tax liabilities of $10,000 or less (exclusive of penalties and interest) may be guaranteed an IA. Taxpayers with liabilities of $25,000 or less, may qualify for Streamlined Agreements. (See IRM 5.14.5.2 and IRM 5.14.5.3, Guaranteed and Streamlined Installment Agreements)
6. There are various methods for making monthly installment agreement payments. The taxpayer should be encouraged to use one of the following electronic methods or credit card payments before accepting payment by check or money order:
1. Electronic Federal Tax Payment System (EFTPS) – Taxpayers will select the "payment-due with IRS notice" payment type for posting to masterfile with a TC 670. EFTPS has the ability to schedule payments up to 12 months in advance for individual taxpayers and up to 4 months in advance for business taxpayers. The taxpayer must initiate payments by sending instructions to EFTPS. (See IRM 21.7.1.4.9 for complete instructions).
2. Direct Debit installment agreements (if taxpayer maintains a checking account you should encourage them to take advantage of the direct debit installment agreement. (See IRM 5.14.10.4 for Direct Debit procedures.)
3. Payroll deduction installment agreements (If the taxpayer will not agree to a direct debit installment agreement, you should encourage them to take advantage of the payroll deduction agreement.) (See IRM 5.14.10.2 for Payroll Deduction procedures.)
4. Credit Card installment agreement payment. (See IRM 21.2.1.4.23.14.4 for procedures for paying by credit card.)
5. Payment by check or money order. If payments are made by check, they should be payable to: US Treasury. However, checks made out to "Internal Revenue Service" or "IRS" will be processed.
7. Certain taxpayers who enter into installment agreements on timely filed returns will have the failure to pay penalty reduced from a half to a quarter percent per month for any month in which an installment agreement is in effect. (IRM 5.14.1.3 describes necessary inputs for TC 971 action codes.) Input of TC 971 AC 063 reduces failure to pay penalty from one half (0.5) to one quarter (0.25) percent per month if all of the following conditions are met.
1. the installment agreement was entered into on or after January 1, 2000;
2. the balances are due from an individual (whether IMF or BMF, due on income, employment or excise tax returns);
3. the tax return(s) was timely filed, including extensions; and,
4. no CP 504, LT 11, or Letter 1058 was sent (indicated by a TC 971 AC 069), increasing the failure to pay penalty from one-half (0.5) to one (1) percent.

Note:

If agreements are terminated, penalties increase to one-half (0.50) percent. Input of TC 971 AC 163 causes reversal of the reduction. (See IRM 5.14.11 regarding defaults and terminations.)

8. See IRM 5.14.7.5(1)(a) — (d), regarding designation of payments during installment agreements.
9. In discussing installment agreements, inform taxpayers:
1. penalty and interest continue to accrue on unpaid liabilities. Provide taxpayers current percentage amounts and interest rates. If taxpayers request further information regarding penalty and interest, IRM 20.1, Chapter 2, provides rates for IRC 6651(a)(1) "failure to file" and IRC 6651(a)(2) "failure to pay" penalties in its sections: 2.3.1(2) and 2.4.1(2), respectively. IRM 20.2.15 provides interest rates, tables and computation information.
2. there is an Installment Agreement User Fee ($43 for new agreements, $24 for reinstated agreements.) (See IRM 5.14.9.5.1 and IRM 5.19.1.5.4.3.);
3. a lien may be filed (see IRM 5.14.1.5.2) and if a lien was previously filed, it remains on file;
4. there is the possibility of a levy if the agreement is terminated;
5. current returns for taxes must be filed and current deposits paid to qualify for an agreement (If applicable, remind the taxpayer of the obligation to make estimated tax payments in order to avoid accruing new tax liabilities which would default their agreement); and,
6. federal tax refunds will be offset. (See IRM 5.14.1.5.1(19)(e))
7. of the right to appeal proposed terminations of installment agreements, terminations of installment agreements and rejections of requests for installment agreements. (See IRM 5.14.9.4)
10. In accordance with law, each year the IRS mails Computer Paragraph (CP) 89, "Annual Installment Agreement Statement," to every installment agreement taxpayer. The statement provides:
• the dollar amount of beginning account balance(s) due;
• an itemized listing of payments;
• an itemized listing of penalties, interest and other charges; and,
• the dollar amount of ending account balance(s) due.

5.14.1.3  (07-12-2005) 
Identifying Pending, Approved and Rejected Installment Agreement Proposals on IDRS

1. Proposals to enter into installment agreements may result from letters, phone contacts, voice-mail, e-mail, or other communications between taxpayers and Service personnel. If proposals to enter into installment agreements are received by e-mail, do not respond by e-mail. E-mail responses violate the IRS Security Policy. In addition, do not solicit e-mails from taxpayers regarding installment agreements, or other tax collection or examination issues. All taxpayers have the right to request installment agreements. Requests for installment agreements, including those on unassessed modules, will be noted in the case history, and must be identified on IDRS within 24 hours.
2. The following transaction codes (TC) and Action Codes (AC) will be used:
• Pending Agreements: TC 971 AC 043 — for requests not immediately approved; and,
• Approved Agreements: TC 971 AC 063 — for immediately approved requests.
3. As noted above, these inputs must be made within 24 hours of the request for, and identification of, installment agreements or pending agreements. These codes prevent levy actions. (See IRM 5.14.1.6 — Levy Restrictions During Installment Agreements.) Area offices will designate officials responsible for inputs in Centralized Case Processing, or at the group, team, or unit level. (See Exhibit 5.14.1–1 — Input of TC 971, Action Codes 043 & 063) Responsible functions must be available during core business hours to receive telephonic requests for input of TC 971, Action Codes 043 and 063.
4. Taxpayers need to provide specific information for installment agreement requests to be processed. Also, if the information in (a) through (d) below is provided but it is determined the agreement request was made to delay collection action, accounts should not be identified as in pending installment agreement status. (See IRM 5.14.3.2) To identify accounts as "pending" installment agreements taxpayers must:
0. Provide information sufficient to identify the taxpayer: generally, the taxpayer’s name and taxpayer identification number (TIN). If a taxpayer furnishes a name, but no TIN number, and the taxpayer ’s identity can be determined, pending status should be identified.
1. Identify the tax liability to be covered by the agreement;
2. Propose a monthly or other periodic payment of aspecific amount.
3. Be in compliance with filing requirements (see IRM 5.14.1.5.1).
5. Requests that meet the criteria in IRM 5.14.1.3(4)(a) through (d) above will be identified as pending installment agreements even if taxpayers are not in compliance with:
• estimated (ES) payment requirements; or,
• federal tax deposit (FTD) requirements,

unless the procedures in IRM 5.14.3.2 apply.

6. If taxpayers do not provide all the information in IRM 5.14.1.3(4)(a) through (d) above, ask them for the missing information. For example, if no payment amount is specified, ask how much can be paid per month. A monthly payment amount must be specified for the account to be marked "pending" .
7. Acceptance or rejection of proposed agreements is based on analysis of Collection Information Statements (see IRM 5.14.1.5)

Exception:

(1) If installment agreement requests are made to delay collection action see IRM 5.14.3.2.

Exception:

(2) Grant Streamlined, Guaranteed and In-Business Trust Fund Express installment agreements based on the criteria in IRM 5.14.5.

8. The following transaction codes (TC) and Action Codes (AC) will be input on ALL taxpayer modules containing TC 971 AC 043 to indicate acceptance or rejection of proposed agreements:
0. For Approved Agreements: request that TC 971 AC 063 be input to IDRS on ALL taxpayer modules.
1. For Rejected Proposals: request reversal of TC 971 AC 043 forty-five (45) days after the rejection is communicated to the taxpayers, unless a timely appeal is received.
2. For Appeals: during appeals, TC 971 AC 043 remains on all modules. If Appeals sustains rejections, input TC 972 AC 043 (if 30 days have passed) or 30 days after rejection is communicated to taxpayers. If Appeals grants installment agreements, follow the procedures above for approved agreements.
9. To identify trust fund recovery penalties as pending or approved installment agreements, the balance due account must be:
• assessed; or,
• Form 2751 must be executed by the taxpayer; or,
• the assessment must be recommended for the potentially responsible officer by approval of Form 4183 and signatures on Letter 1153.
10. Examples of "Pending" and "No Pending (agreement)" are in IRM 5.14.1.5 and the two charts below.

5.14.1.4  (09-30-2004) 
Cases Received From ACS or Campuses

1. In circumstances where cases are assigned to the field from ACS or Campuses with Transaction Code (TC) 971 Action Code (AC) 043 present on one or more of the tax modules, employees will:
1. Attempt to contact the taxpayer.
2. If contact is made, determine if the taxpayer wants an installment agreement.
3. If the taxpayer wants an installment agreement, follow the procedures in IRM 5.14.3.1, regarding requesting payments. Include a definite request for payment, if appropriate. Consider the contact date to be the new request date and begin case action. If rejection is planned, an independent review is required. If the TC 971 AC 043 has not been input on all Balance Due periods, request input immediately.
4. If the taxpayer did not request an installment agreement, request reversal of the TC 971 AC 043 using TC 972 AC 043 with the same date of input.
2. In some situations the criteria regarding installment agreements made to delay collection action may apply. In these cases, if the current date is within 30 days of the input date of the TC 971 AC 043, and it is clear one of the criteria provided in IRM 5.14.3.2 is present:
1. Contact is necessary.
2. Follow the procedures provided in IRM 5.14.3.1.
3. Independent review is not necessary.
4. Request input of TC 972 AC 043.
5. Ensure case histories are documented with regard to the procedures provided in IRM 5.14.3.2.

5.14.1.5  (07-12-2005) 
Interest-Based Interviews: Installment Agreement Acceptance and Rejection Determinations

1. Conduct an interest-based interview with balance due taxpayers. Interest based negotiation with taxpayers reduces the risk of misunderstanding. The purpose of the interview is to determine the best manner of resolving the taxpayer’s balance due accounts and, if appropriate, delinquent returns. At the interview:
1. Provide the taxpayer with Publications 1 and 594 (See IRM 5.14.1.2(1)) and request full payment. If the taxpayer is unable to fully pay the liability immediately, ask the taxpayer how much can be paid within 120 days, and request that amount. (See the procedures provided in IRM 5.14.5.5 regarding Extensions of Time to Pay.) If the liability will be fully paid within 120 days, secure the following minimum information only on the financial statement: name and address of employer(s) (accounts receivables if sole proprietor or business); bank name and address, bank account number; full property address of all real property; and year, make, model and tag number of motor vehicles.

Note:

If additional time is given to an ACS taxpayer, inform the ACS call site immediately.

2. If the taxpayer states that balance due accounts cannot be fully paid within 120 days, a full Collection Information Statement (CIS) must be completed to determine the taxpayer’s ability to pay. (Refer to IRM 5.15.1.3.1, to determine allowable expenses.)

Exception:

If taxpayers are eligible for streamlined, guaranteed or in business Express agreements, financial statements are not required. (See IRM 5.14.5.2, IRM 5.14.5.3, or IRM 5.14.5.4)

3. While completing financial statements, ensure taxpayers interests are considered. Allow taxpayers to explain reasons for expenses and other circumstances they believe impact their ability to pay and remember that financial (National and Local) standards are guidelines. (See IRM 5.15.1.3)

2. Based on the results of the interest-based interview, determine a plan for resolving the balance due accounts. The plan should be based upon:

• results of financial statement analysis; and,
• other information and documentation provided by taxpayers.

3. There are no minimum nor maximum dollar limits for the amount of a liability that may be included in an installment agreement. (However, see IRM 5.14.4.2(4) regarding $25 per month (or less) agreements. Unless such agreements are "guaranteed" (per IRM 5.14.5.3) payments should be redirected to current withholding on the current year’s W-4.)

4. If taxpayers are unable to fully or partially satisfy balance due accounts, and an installment agreement will fully satisfy the balance due accounts (or accounts included in agreements provided by IRM 5.14.2.2) then installment agreements should be considered.
5. Installment agreements must reflect taxpayers’ ability to pay on a monthly basis throughout the duration of agreements.
0. If taxpayers do not agree to payment amounts, or to increases, inform them that these, and other issues (see IRM 5.14.1.5(6) through (9) below) may be discussed with the next level of management.
1. Employees may choose to bring managers into discussions to assist in reaching agreements.
2. If agreements cannot be recommended for approval, inform taxpayers their requests are pending, and rejection of the request will be recommended, and refer the case for independent administrative review.
6. If taxpayers have the ability to fully or partially satisfy balance due accounts by:
• using cash;
• withdrawing cash from bank or other accounts;
• borrowing on equity in real or personal property; or,
• selling real or personal property, then:
4. request full or partial payment (specify amount) be made on the balance due accounts.
5. inform the taxpayer that the specific amount of payment requested is, based on conversion of assets (through borrowing or selling); or cash or other liquid assets (such as securities or money market accounts); or other analysis of the taxpayer’s financial statement.
6. inform taxpayers installment agreements will be recommended for rejection if there is sufficient equity or cash available to fully pay the taxes, and full payment is not received by a set date, or partially pay the taxes, and the partial payment requested is not received by a set date.

Note:

See IRM 5.14.3.1 about providing deadlines.

7. Provide a specific deadline for payment. In addition, notify taxpayers of the consequences of missing the deadline. (See IRM 5.14.3.1 for additional information.)

Example:

If a taxpayer has the ability to pay $3,000 per month on a $200,000 liability, has a home valued at $400,000 with equity of $200,000, require that he attempt to borrow on the available equity in the home prior to granting an installment agreement. If the taxpayer does not attempt to borrow on the home he must be notified that, though the installment agreement request is pending, it will be recommended for rejection. If the taxpayer is able to get a home equity loan and the monies are used to pay taxes, the amount of the payment on the loan will be considered an allowable expense.

Exception:

If taxpayers are eligible for streamlined, guaranteed or in business Express agreements, financial statements are not required. (See IRM 5.14.5.2, IRM 5.14.5.3, or IRM 5.14.5.4)

7. Caution:

8. Do not warn taxpayers of enforcement action if installment agreements are pending or in effect. See IRM 5.14.3.1 for additional information.
9. Taxpayers do not qualify for installment agreements if balance due accounts can be fully or partially satisfied by liquidating assets, unless:
• factors such as advanced age, ill-health, or other special circumstances, are determined to prevent the liquidation of the assets; and/or,
• they qualify for guaranteed or streamlined or Express agreements. (See IRM 5.14.5)

Reminder:

The taxpayer has the right to Taxpayer Advocate Service (TAS) assistance if the liquidation of assets causes a hardship.

10. Installment agreements may be granted if taxpayers make payments on balance due accounts that reduce the unpaid balance(s) of assessments (UBAs) to amounts that fit streamlined, guaranteed or in business Express criteria.

Example:

If a taxpayer has equity in assets and cash that total $100,000 and owes $40,000 (UBA) in taxes, request full payment of the balance due accounts. If the taxpayer makes payments that reduce the UBA to $25,000 and requests a streamlined installment agreement, the agreement will be granted.

11. If an analysis of the taxpayer’s financial condition shows taxpayers cannot pay:
• but they insist on installment agreements;
• amounts proposed will fully pay the balance due account(s) within the collection statute (and waiver period if appropriate);
• but the possibility remains that payments cannot be made;

then prepare a backup Form 53 along with the installment agreement in case of eventual default and termination. (See Exhibit 5.14.1–2 and IRM 5.14.4.2.)

Note:

If the amounts proposed by the taxpayer will not fully pay the balance due account(s) within the collection statute then Partial Payment Installment Agreements may be considered (See IRM 5.14.2.2.)

12. If analysis of the taxpayer’s financial condition shows a liability cannot be collected in full through an installment agreement, discuss the possibility of an offer in compromise with the taxpayer (See IRM 5.8 and IRM 5.14.2.2 regarding partial payment installment agreements.)
13. See IRM 5.14.9.3 regarding Independent Administrative Review if installment agreement requests are recommended for rejection.
14. See IRM 5.11.1.2.2 and IRM 5.10.1.4(2) if taxpayers qualify for installment agreements or offers in compromise but:
• do not submit or request one; or;
• do not agree to an acceptable payment amount.

Note:

Also see IRM 5.14.2.1(21) and IRM 5.14.3.1.

15. Reminder:

16. Although the intention to recommend rejection may and should be relayed, actual rejection of proposed agreements must not be conveyed to taxpayers prior to independent administrative review, and enforcement action may not be taken while installment agreements are pending.
17. For agreements that require no managerial approval see IRM 5.14.5.2, 5.14.5.3, and IRM 5.14.5.4 below. For agreements that require management approval see IRM 5.14.9.2.

5.14.1.5.1  (07-12-2005) 
Compliance and Installment Agreements

1. Filing and paying compliance must be considered prior to determining that the best manner of paying delinquent taxes is through an installment agreement.
2. Ensure all balance due modules, including cross-referenced taxpayer identification numbers displayed on IDRS and Masterfile (use CFOL commands) are included in agreements. (See IRM 5.14.1.5.1(16) for necessary information and IRM 5.14.2.2 for exceptions.)
1. Individuals that are in business as sole proprietors must be in compliance with both individual and business filing requirements to qualify for installment agreements.
2. If sole proprietors have delinquent accounts on two or more taxpayer identification numbers (SSN and EIN) all balance due accounts must be included in one agreement. (See IRM 5.14.2.2 for exceptions and IRM 5.14.8.2 and IRM 5.14.8.3 for monitoring.)
3. Liabilities for returns that were filed, but are not assessed, may be included in installment agreements. Use Installment Agreement Locator Number XX32 (See Exhibit 5.14.1–2) Ensure all account balances included in agreements will be fully paid prior to CSEDs plus allowable extensions. (See IRM 5.14.2.1(3)). See IRM 5.14.2.2 for information on partial payment installment agreements.
4. Taxpayers must be in compliance with all filing requirements prior to approval of installment agreements.
5. Do not grant installment agreements if taxpayers have not filed required returns. Do not identify requests for agreements as "pending " agreements if taxpayers have not filed required returns. (See IRM 5.14.1.3(4)(d).)
6. A Del Ret is present when a delinquency investigation is established by input of Transaction Code (TC) 140. In some publications and procedures the term "Taxpayer Delinquency Investigation" (TDI) is used to describe Del Rets.
7. If Del Ret status is not indicated for a tax period then, for the purpose of granting an installment agreement, no additional compliance check is required (except on tax returns due within the past sixteen months – see IRM 5.14.1.5.1(8) below).
8. Prior to granting IAs, ensure that tax returns due within the past sixteen months were filed. If not filed, address compliance even if a Del Ret is not indicated using the procedures provided in IRM 5.14.1.5.1(11) below. This ensures compliance is addressed when Del Ret case creation has not yet occurred. Del Rets are created within sixteen months of due dates of returns.
9. If Del Rets were resolved by one of the following methods, the closure is not considered evidence of compliance for the purposes of entering into an installment agreement:
1. surveyed;
2. shelved;
3. unable to locate;
4. referred to Exam or SFR (unless the assessment is pending or the case is assigned);
10. If Del Rets were resolved by a closure listed in IRM 5.14.1.5.1(9)a – d above, but it is determined that they could have been closed as provided in IRM 5.14.1.5.1(12) below, then input (or request input of) appropriate transaction and closing codes. In these situations installment agreements may be granted when closing Del Rets.
11. If an installment agreement is the appropriate case resolution, and there is an open Del Ret on another tax module(s); then the installment agreement may be granted when:
1. Tax return(s) indicated as due are filed.
2. Del Rets are resolved using the dispositions listed in IRM 5.14.1.5.1(12).
3. Del Rets are resolved using the dispositions listed in IRM 5.14.1.5.1(13).
12. Installment agreements may also be granted when the following closures are present:
1. No return secured – little or no tax due (Policy Statement P-5-133);
2. No return secured – taxpayer due refund.
13. If taxpayers are not required to file returns, such modules should be closed using appropriate transaction and closing codes. The return closing codes that indicate filing compliance, or that filing is not required are contained in LEM 5.3. Also see Document 6209 Chapter 11 for definitions.
14. If taxpayers are required to file returns and these returns are not filed, installment agreements cannot be granted or approved. For a list of closing codes for returns that are not indicators of filing compliance see LEM 5.3. Also see Document 6209 Chapter 11 for definitions.
15. If delinquency investigations (del rets) were closed with a transaction code that does not indicate filing compliance, request that returns be filed within a reasonable timeframe.
16. See IRM 5.1.11.4 for exceptions and guidance regarding the filing of returns.
17. Compliance checks based on case information:
1. Except in those situations described in IRM 5.14.1.5.1(7) and IRM 5.14.1.5.1(8) above, further compliance investigation is neither required nor prohibited, if Del Ret status is not indicated on IDRS. In addition, unless there is a Del Ret, no CFOL review (and no IRPTR review) is required.
2. If further research is conducted, and there is an indication a return is due, then address filing compliance prior to granting installment agreements. Installment agreements may not be granted if it is determined taxpayers are liable for unfilled Balance Due returns. (P-5-133, refund return determinations and the dispositions provided in IRM 5.14.1.5.1(12) are permitted in these situations, if determined appropriate after further investigation.
18. The compliance checks described in this section are conducted to determine eligibility for installment agreements after they are requested by taxpayers. If taxpayers do not file requested returns within provided timeframes (and the circumstances described in IRM 5.1.11.4 do not apply) requests for agreements will not be identified as pending (rejection and independent review are inapplicable) and agreements will not be granted.
19. Analyze the current year’s anticipated tax liability. If it appears a taxpayer will have a balance due at the end of the current year, the accrued liability may be included in an agreement. Compliance with filing, paying estimated taxes, and federal tax deposits must be current from the date the installment agreement begins. Use Agreement Locator Number (ALN) XX32. (See Exhibit 5.14.1–2)
1. If the taxpayer’s withholding is insufficient, emphasize the importance of adjusting Form W–4 to avoid future balance due situations. If personal (face-to-face) contact with the taxpayer is made, calculate the current amount of withholding with the taxpayer. With the taxpayer’s concurrence, prepare a new Form W–4 for signature. Mail the signed Form W–4 to the taxpayer’s employer.
2. Advise taxpayers to make estimated tax payments and/or federal tax deposits (FTDs) if required;
3. Advise taxpayers that failure to make timely estimated tax payments and/or FTDs may result in penalties;
4. Advise taxpayers that future compliance with tax laws is required. Any returns and/or taxes due within the period of the agreement must be filed and paid timely;
5. Advise taxpayers that federal tax refunds are subject to offset to pay balance due accounts during installment agreements, including refunds from income taxes of individuals whose sole proprietorship or partnerships owe taxes and have installment agreements. (In these cases, ensure TC 130 is input for the appropriate social security number(s).)

5.14.1.5.2  (09-30-2004) 
Notice of Federal Tax Lien and Installment Agreements

1. Prior to granting installment agreements, ensure the government ’s interest is protected. This includes filing and re-filing notices of federal tax lien, if necessary. (See IRM 5.12.1.16 and IRM 5.12.1.17 for lien filing instructions.)
1. A lien determination must be made on all cases meeting the criteria of IRM 5.12.2.8.1. (In general, accounts that do not qualify for guaranteed, streamlined, or in-business trust fund Express processing require lien determinations.)
2. When filing a Notice of Federal Tax Lien (NFTL) in connection with an installment agreement advise taxpayers in advance of the plan to file the lien and give them the opportunity to make full payment.
2. Notices of federal tax lien may be filed:
• while installment agreements are pending;
• in connection with granting installment agreements;
• during the rejection process; and,
• during the default/termination period.

Note:

See IRM 5.14.11.7(1)(f) and IRM 5.14.11.8 regarding filing notices of federal tax lien during defaulted and/or terminated installment agreements.

3. Though not general practice to do so, liens may also be filed:
• while installment agreements are in effect; and,
• during appeals of rejections, defaults and terminations. (Inform Appeals of this plan.)

Note:

Group manager approval is required for liens filed in accordance with (3) above. Review IRM 5.12.1 prior to filing these liens.

4. Taxpayers are entitled to a "Collection Due Process" Appeal if a NFTL is filed. (See IRM 5.1.9 regarding Collection Appeal Rights when filing Notice of Federal Tax Lien.) For Notices of Federal Tax Lien filed before, or in connection with, granting installment agreements:
0. retain sufficient documentation to respond to Collection Due Process (CDP) appeals (if later filed); or,
1. if in the judgment of the revenue officer a CDP appeal is likely the case may be kept open until 45 days have passed.
2. If an appeal is filed, refer to IRM 5.12.1 Lien Appeals and IRM 5.1.9.3.5 Processing Requests for Collection Due Process and Equivalent Hearing.
5. If it is determined no lien should be filed in connection with an installment agreement, then:
• See IRM 5.12.2.8.2 for non-filing guidelines;
• notify taxpayers liens may be filed if agreements default; and,
• use locator number XX66 on the installment agreement. (See Exhibit 5.14.1–2.)
6. Taxpayers may request notices of withdrawal of notices of federal tax lien in connection with installment agreements. (See IRM 5.12.2.25 through 32 and IRC 6323(j) for further information.)

5.14.1.5.3  (07-12-2005) 
Increases, Decreases, Varied Payment Amounts; Completing and Processing Installment Agreements

1. The amount of the taxpayer’s payment depends on his or her ability to pay. (See IRM 5.14.1.5(5).)
1. Only equal monthly installment payments can be monitored on IDRS. However, inform taxpayers that extra payments or higher payments can be accepted at any time.
2. Space is provided on Form 433–D, Installment Agreement, and Form 2159, Payroll Deduction Agreement, for scheduled increases or decreases in payment amounts. IDRS will accept two changes in payment amounts when agreements are input for systemic monitoring. Agreements must be manually monitored if more than two changes in payment amount are planned. Document reasons for scheduled increases or decreases. Reasons can include expected full payment of a loan that will increase the taxpayer’s ability to pay; income is scheduled to increase or decrease; or necessary living expenses are scheduled to increase or decrease.
2. Agreements may include an increase of one or two large payments to fully or partially pay accounts if it is documented and verified taxpayers will receive funds to make the payments. (Ensure liabilities are satisfied prior to the CSED including extensions – See IRM 5.14.2.1). These payments may be represented as increases in the installment payment amount as discussed in IRM 5.14.1.5.3(1)(b) above. Situations that may call for this type of agreement include:
• contract sales with determined payment date(s);
• judgments resulting in fixed settlement and payment dates;
• beneficiary, distributee or payee status in trusts, estates, or profit sharing plans resulting in expected payment(s) on certain date(s);
• accrued equity in assets from which taxpayers plan to borrow when the monthly payment is scheduled to increase; and,
• other projected receipts of funds.
3. Payment schedules may incorporate varied payments. Support varied payment schedules with documentation. Examples of reasons for varied payment schedules include, but are not limited to:
• anticipated fluctuations in business cycles for businesses or "commission" employees;
• contract employment;
• self employment;
• seasonal employment;
• seasonal expenses (for example, child-care costs when school is out); and,
• planned (scheduled) changes in employment status, such as plans to work part-time, or reduced schedules, especially if the changes are made in order to facilitate a parent staying home with children, even if this means making numerous changes to monthly payment amounts over a period of time.
4. For all agreements: request that taxpayers select a day of the month, from the 1st through the 28th, for the payment due date. Advise taxpayers:
0. on IDRS monitored agreements, a monthly payment reminder notice (CP 521) will be mailed to taxpayers two cycles before each payment due date. A pre-addressed envelope is included with the notice;
1. to send payments according to the terms of agreements, even if no reminder notice is received;
2. in the absence of pre-addressed envelopes, payments can be mailed to the campus address that services the area, i.e. Internal Revenue Service, city, state and zip code of appropriate SB/SE or W&I campus;
3. names, tax identification number and tax forms included in the agreement must be written on the front of checks. Checks should be payable to US Treasury. (See IRM 5.14.1.2(6) and note that installment agreement payments may not be designated — see IRM 5.14.7.5(1).)
5. Assign Agreement Locator Numbers (ALNs) in accordance with Exhibit 5.14.1–2. Use a multiple condition ALN when appropriate. (Also see IRM 5.14.9.5 — Disposition of Approved Installment Agreement Documents.)
6. List levy source information, including complete addresses and ZIP codes on installment agreement forms.
7. Taxpayer signatures must be secured on all Forms 2159 (see IRM 5.14.10.3.) Also, though taxpayer signatures are generally not required on Forms 433–D,
• signatures on Form 433–D are required for direct debit agreements (attach the taxpayer’s blank, voided check for processing); and,
• they may be obtained when taxpayers are available during personal contact.
8. If installment agreements are based on mail, fax or phone contact, write "Telephone Agreement" , "Fax Agreement" , or "Mail Agreement" in the signature block of the agreement form. Also use this option if taxpayers are not available to sign agreements when they are ready for approval, even if there was prior personal contact. Copies of agreements should be mailed to taxpayers with Letter 1798(DO).
9. Agreements that call for payments less than $25 are considered "below deferral level" . (See IRM 5.14.4.2 for agreements on below deferral level taxpayers.)
10. Approval authority for installment agreements is provided in IRM 5.14.9. If approval cannot be secured while taxpayers are present advise them proposed installment agreements must be approved. (See IRM 5.14.3.1 regarding requests for payments in the interim, and IRM 5.14.1.3 regarding necessary inputs to IDRS.) Submit agreements for approval before any payments are due. If there are delays in the approval process notify taxpayers.
0. Fully consider taxpayers’ rights and interests prior to recommending rejection of an installment agreement request. Consider all aspects of the request including circumstances presented by taxpayers that they believe qualify them for agreements; information taxpayers provide in support of approving the agreement; and the independent review criteria described in IRM 5.14.9.3(4) and IRM 5.14.9.3(5) below. Although taxpayers should be informed that rejection of agreements is recommended, do not convey actual rejection of proposed agreements prior to independent administrative review except in the limited situations described in IRM 5.14.3.1 below. (Also see IRM 5.14.9.3, regarding the independent review process.)
1. If additional information or action is required (for instance an attempt to borrow is requested) then request the necessary information or action from the taxpayer and establish a reasonable action date. Explain the consequences of failure to comply with the request. If an action date is missed, refer the case to the independent administrative reviewer prior to conveying rejection of the proposed agreement to the taxpayer. In general, no enforcement action may be taken as a consequence of such missed action dates, unless the situations described in IRM 5.14.1.6(2) or in IRM 5.14.3 are present. (See also IRM 5.14.9.3 regarding Independent Administrative Review.)
2. While meeting or speaking with taxpayers, if they do not agree to payment amounts, or to increases in payments, advise them that a meeting with the next level of management may be requested. Also, employees may decide to bring managers into discussions about installment agreements with taxpayers, if it assists them in finalizing agreements. If approval of an agreement is not planned, inform the taxpayer that the status of the agreement is " pending" , and rejection will be recommended and that rejected requests may be appealed. Then refer such cases for independent administrative review. (See IRM 5.14.9.3 — Independent Administrative Review)
11. Telephone contact must be made with call sites on installment agreements secured on ACS accounts no later than two workdays after interviews are concluded. If it is determined liens should be filed, contact call sites to file liens. Document case histories regarding such actions. (See IRM 5.14.1.5.2 regarding liens.)
12. Inform taxpayers failure to pay penalty is reduced on installment agreements if certain conditions are met. (See IRM 5.14.1.2(7).)

5.14.1.6  (07-12-2005) 
Levy Restrictions and Installment Agreements

1. No levy may be made on taxpayer accounts:
1. while requests for installment agreements are pending;
2. while installment agreements are in effect;
3. for 30 days after requests for agreements are rejected;
4. for 30 days after agreements are terminated; and
5. while an appeal of a default, termination or rejection is pending or unresolved.

Note:

Criteria for identifying "pending" agreements is in IRM 5.14.1.3.

2. Levies may be served during the periods described in IRM 5.14.1.6(1) above:
1. if taxpayers waive the restriction in writing (see Exhibit 5.14.1–3);
2. if collection is in jeopardy (i.e. if a condition allowing a jeopardy assessment exists.) In these situations CP 523 (Letter 2975 for MMIAs) is not required. Unless notice of the right to appeal was previously provided, taxpayers must be notified of their appeal rights after jeopardy levies. (See Policy Statement P–4–88. See also IRM 5.11.1.3.9 and Exhibit 5.11.1–1 for approval levels for jeopardy levies. Approval level depends on whether notices described in IRM 5.11.1.2.1 were sent, and if required waiting periods have passed);
3. for balance due accounts not included in current installment agreements. (The new tax periods are not affected by the appeal period for defaulted installment agreements.)

Caution:

In this context, "current " installment agreements include those in IDRS status 64 (default) because they remain in status 60 on Masterfile for the 13 cycles they are in status 64 on IDRS (until terminated and removed from status 60.) Also, CDP notices and timeframes must be provided to taxpayers on all balance due accounts before levies are served. (See IRM 5.14.2.2 (regarding partial payment installment agreements and Notices of Levy IRM 5.11.1.2)

Example:

The taxpayer has an installment agreement on payroll taxes for the periods ending September 30, 1999, and December 31, 1999. The period ending March 31, 2001, is not included in the installment agreement and now has a balance due and all appropriate due process notices were mailed. The default Letter 2975(DO) has been sent on the periods in the installment agreement, but 90 days have not passed. In this example, although levies may not be served for those tax periods included in the agreement, levies may be sent to levy sources to collect on the balance due for the period ending March 31, 2001.

3. If an installment agreement is identified as pending , and a levy is outstanding, it may be released, but it is not required that such levies be released. If an installment agreement is approved, and there is a levy outstanding, it must be released, unless the agreement provides otherwise. If an outstanding levy will remain in effect during an installment agreement, document this in the "Additional Conditions" block of the agreement form. (See IRM 5.11.1.3.9.)

Example:

(1) A levy has attached funds in the taxpayer’s bank account and an installment agreement is prepared before the proceeds are received. If it is decided, with concurrence of the taxpayer, not to release the levy, this must be written in the Additional Conditions block of Form 433–D.

Example:

(2) If a wage levy is to remain open while a taxpayer is making installment payments, it must be written in the "Additional Conditions" block of Form 433–D that the levy is to remain in effect until the liability is satisfied (or the levy is released).

Note:

If the levy is to collect on a balance due account that is not included in an installment agreement, then no release is required.

Exhibit 5.14.1-1  (07-12-2005) 
Input of Transaction Code 971 Action Codes 043 and 063 for Pending and Active Installment Agreements


 


Exhibit 5.14.1-2  (07-12-2005) 
Installment Agreement Locator Numbers — (ALNs)




Exhibit 5.14.1-3  (09-30-2004) 
Waiver of Restriction of Levy During a Pending or Active Installment Agreement

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