- 4.20.1.1 Overview
- 4.20.1.2 Examiner's Responsibilities
- 4.20.1.3 ARDI Coordinator
- 4.20.1.4 Processing Form 9440
- Exhibit 4.20.1-1 Collectibility Procedures for Examiners
- Exhibit 4.20.1-2 Definitions & Collectibility Options
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This section provides an introduction to collectibility procedures used by examiners.
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Exhibit 4.20.1–1 provides a flowchart of collectibility procedures for examiners.
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Exhibit 4.20.1–2 provides definitions of common collectibility terms and payment collectibility options.
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Examiners are expected to consider collectibility during the pre-contact phase as a factor in determining whether to survey the return or limit the scope and depth of examination. Collectibility may also become a factor for consideration during the course of an examination.
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At the initial examination appointment, taxpayers should be advised that payment options will be discussed, and payment solicited, during the closing conference if any deficiency is recommended.
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Once the examination is completed and an assessment recommended, examiners should request payment of agreed deficiencies resulting from examinations.
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If the taxpayer is unable to make full payment, payment and/or collectibility options should be explained to the taxpayer. These include installment agreements and Offers-in-Compromise (doubt as to collectibility). Publication 594, The IRS Collection Process, may be used for this purpose.
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If the examiner does not secure full payment or an installment agreement from the taxpayer, a referral to Collection should be considered and is mandatory for agreed unpaid cases over $100,000.
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Examination employees have the authority to accept streamlined installment agreements. If the taxpayer requests an installment agreement that does not meet examination's authority, a referral is made to Collection for consideration. Collection has jurisdiction for Offers-in-Compromise (doubt as to collectibility) and currently not collectible determinations. See IRM 4.18.1 through 7 for examination procedures on processing doubt as to liability offers.
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Examiners should document their workpapers concerning their assessment of collectibility as outlined in IRM 4.20.3.3.
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If collectibility was an issue, was it considered?
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Was payment received?
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Was an installment agreement secured?
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If the taxpayer asked for an installment agreement outside Exam's authority, was the case referred to Collection?
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If the agreed deficiency was over $100,000 and not paid, was the case referred to Collection?
Note:
The workpaper documentation should enable the reviewer to readily make a determination regarding the above aspects. The requisite documentation should generally be included in the package audit section of the workpapers.
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Form 9440, Taxpayer Levy Source and Contact Information, is completed and included in the case file in all unpaid cases (agreed and unagreed).
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To promote quality assessments and early collections, each Area Director may appoint an ARDI (Accounts Receivable Dollar Inventory) or Collectibility Coordinator.
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Responsibilities of the ARDI Coordinator may include:
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Ensure that examiners are aware of and follow the collectibility procedures outlined herein.
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Implement procedures to assist taxpayers who request an installment agreement but are outside Examination's installment agreement authority.
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Develop procedures to refer all unpaid, agreed cases with a deficiency over $100,000 to Collection for resolution.
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Coordinate training, information exchanges, and all other matters relating to the issues of quality assessments and collection of examination deficiencies.
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Coordinate with Collection to establish focal points for other collectibility referrals and/or address taxpayer questions.
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Case Processing will input the taxpayer levy source and contact information contained on Form 9440.
Full Pay—Prompt payment of the full amount due will stop penalties and interest from accruing.
Installment Agreement—Installment agreements allow the full payment of the deficiency (including penalties & interest) in smaller, more manageable amounts. Installment agreements generally require equal monthly payments. They should only be secured in instances where full payment will result within the sooner of the term of the installment agreement or the collection statute expiration date (CSED).
Offer in Compromise—Offers in Compromise may be requested by taxpayers on the basis of: (1) doubt as to liability (DOL), (2) doubt as to collectibility (DOC), or (3) specific hardship and/or equitable criteria if such a compromise would promote effective tax administration. An offer in compromise is a taxpayer's proposal to the government for settlement of a liability for an amount less than previously determined and assessed. DOC offers in compromise are generally considered by the Collection function; and DOL offers in compromise are generally considered by the Examination function.
Currently not Collectible—When analysis of the Collection Information Statement (CIS) indicates the taxpayer is currently unable to pay, Form 53, Report of Currently Not Collectible Taxes, is completed by Collection personnel. A lien may still be filed in this instance, subsequent refunds are withheld, and subsequent actions/identifiers may cause recurring collectibility determinations at later dates.
Lien—A lien is a legal claim to the property of the taxpayer as security for a tax debt. A Notice of Federal Tax Lien may be filed after a liability is assessed and full payment is not made within 10 days of issuance of a Notice of Demand for Payment. Liens are generally not released until full payment is made and/or 10 years after the initial assessment.
Levy—A levy is a seizure of the taxpayer's property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.