This IRM provides guidelines and procedures for the collectibility program for SB/SE examiners. Examiners must strive for quality assessments and promote an increased emphasis on early collections in the continuing effort to reduce the Collection function's inventory and currently not collectible (CNC) accounts. Examiners are required to consider the collectibility of a potential tax assessment and solicit payment, including installment agreements for all unpaid balances. The keystone of our compliance activities is to promote voluntary compliance, and examinations contribute to that by having an impact on taxpayer behavior and providing a deterrent to other potentially noncompliant taxpayers.

By law, the IRS has the authority to collect tax under Title 26, Internal Revenue Code, Subtitle F Procedures and Administration, which includes, but is not limited to, the following IRC sections:

The Director, Headquarters Examination, is the executive responsible for providing policy and guidance for Field employees and ensuring consistent application of policy, procedures, and tax law to effect tax administration while protecting taxpayers’ rights. See IRM 1.1.16.3.5, Headquarters Examination, for additional information.

The Director, Examination - Field and Campus Policy, reports to the Director, Headquarters Examination, and is responsible for the delivery of policy and guidance that impacts the Field examination process. See IRM 1.1.16.3.5.1, Field and Campus Policy, for additional information.

Field Examination Special Processes (FESP), which is under the Director, Examination - Field and Campus Policy, is the group responsible for providing oversight and policy and procedural guidance on specialized examination processes to SB/SE Field examiners and group managers. See IRM 1.1.16.3.5.1.2, Examination - Field and Special Processes.

Periodic program reviews are conducted by FESP to:

The following table lists commonly used acronyms and command codes with their definitions as used throughout this IRM:

The following table lists commonly used terms and associated definitions as referenced throughout this IRM:

The following table contains related IRMs which cover additional collectibility procedures that are referenced throughout this IRM.

The following forms and notices are commonly used in the collectibility process and are referenced throughout this IRM.

The following table lists the Master File codes that identify installment agreement actions and their respective definitions.

The examiner must determine the taxpayer’s total outstanding liabilities, and filing and payment compliance. This affects not only the scope as described below, but also affects the taxpayer’s payment options at the completion of the examination. A decision to limit the scope of the examination should be made only after all facts and circumstances have been considered. Examiners must apply the considerations described in paragraphs (2) through (11) below in all examinations where applicable.

Examiners will review AMDISA to determine if the collectibility indicators are present. The code is located in the lower left section of an AMDISA.

Examiners may use Form 9439, Collectibility Evaluation Form, as a job aid in evaluating collectibility if any of the following situations are applicable in the examination:

Examiners should evaluate (using Pre-Contact Minimum Income Probes as outlined in IRM 4.10.2.3.2, Examination of Income) the taxpayer’s current and future financial potential. Considerations include the following:

Examiners will consider the CSED when evaluating future earning potential or future financial position. In general, Collection will have ten years from the date of the assessment to collect a liability. The CSED is the last date the IRS has to collect an outstanding balance due on an account, unless the CSED is extended by case action, event, or waiver secured in connection with certain installment agreements.

The effect on compliance should always be a part of the decision to limit the scope. The scope should not be limited if it would have an adverse impact on voluntary compliance. Equitable treatment of all taxpayers must be a factor in compliance considerations.

The scope should not be limited if indications of fraud are present or the taxpayer is manipulating assets to portray a lack of resources. The FinCEN database may be queried for transactions concerning the taxpayer. This may reveal a different financial condition than otherwise disclosed by the taxpayer. Additional information on accessing FinCEN can be found in IRM 4.26.4.5.4, Gatekeeper or Super User Procedures.

Contact your Technical Services Exam Bankruptcy Coordinator if the taxpayer has filed for bankruptcy. Coordinators are listed by state via the following link:https://portal.ds.irsnet.gov/sites/vl051/Lists/CollectibilityConsiderationandRelatedTopics/DispItemForm.aspx?ID=2. See IRM 4.27.1, Bankruptcy Petitions.

Examiners should apply IRM 1.2.1.6.18, Policy Statement 5-133 Delinquent returns - enforcement of filing requirements (six - year enforcement period) for non-filed returns. On a case-by-case basis, examiners may limit the number of delinquent returns to secure based on collectibility.

Collectibility considerations do not apply to the following:

Use professional judgment when considering the facts and circumstances to determine the scope and depth of examinations. The following examples provide guidance on applying the considerations and the resulting effect on the examination:

Examiners should apply the collectibility considerations as listed in IRM 4.20.1.2.1 when identified. A discussion must be held with the group manager when collectibility indicators are present. During this discussion, a decision is made to survey, limit the scope, or continue the examination. The discussion with the group manager must be documented on the appropriate lead sheet as outlined in IRM 4.20.1.4.2.

The return may be surveyed based on assessment of collectibility outlined in IRM 4.20.1.2.1. Complete Form 1900, Income Tax Survey, documenting the collectibility reasons for the survey. Retain the form in both the physical and RGS/IMS electronic case files after approval by the group manager.

The decision to limit the scope can be made during the pre-contact based on facts and circumstances, Examiners will document reasons for limitation and planned scope in the appropriate lead sheet as stated in IRM 4.20.1.2.2. For example, the examiner should list which LUQ items will be examined and the basis for their decisions. See IRM 4.10.2.7.1.3, Limiting the Scope.

Examiners should inform the taxpayer(s) and/or representative at the initial examination appointment that payment options will be discussed and payment solicited during the closing conference or at the conclusion of the scheduled office examination appointment if any deficiency is recommended.

Secure delinquent returns if applicable during the examination so the taxpayer is fully compliant to qualify for an installment agreement as stated in IRM 4.20.1.4.1.

It may be necessary to limit the scope during the examination if the taxpayer’s financial condition changes after the pre-contact. If the situation occurs, the examiner will prepare a report at the earliest possible opportunity. The following adjustments should be included in the examination report:

Field examiners must document all steps taken in the determination of collectibility on the appropriate lead sheet (or supporting workpaper referenced to the lead sheet, Form 9984, Examining Officer’s Activity Record, or RGS Case History) for all cases:

Examiners should refer the taxpayer to https://www.irs.gov/payments and encourage taxpayers to pay online. Provide the taxpayer with Pub 5034, Need to Make a Payment? Flyer.

The primary objective is to obtain FULL payment of the deficiency when the examination is complete.

Solicit full payment for the exam deficiency and any outstanding balances due from all tax years during the closing conference or at the conclusion of scheduled office examination appointments. TXMOD and IMFOLI (or BMFOLI) can be used to determine outstanding balances.

For unagreed cases, examiners should solicit payment and explain benefits of posting an IRC 6603 deposit which stops the accumulation of interest. See Rev. Proc. 2005-18 for background. For a detailed explanation of the enactment of IRC 6603, see IRM 20.2.4.8.2, IRC 6603 Deposits.

Taxpayers should be informed of the following benefits of making a current payment:

The tiered interview should be used to determine the taxpayer’s ability to pay and include the following dialogue:

Examiners must discuss the taxpayer’s options for full payment before discussing other alternatives. Examiners may use Pub 594, The IRS Collection Process to explain payment options with taxpayers. See IRM 4.18.7.1, Offer-in-compromise (OIC) Filed During the Audit, if the taxpayer requests an OIC DATC during the audit. Options for full payment can include:

Examiners must solicit installment agreements if taxpayers qualify and cannot pay in full. See IRM 4.20.1.4.

For online payments, verify payment posting of TC 670 on TXMODA (pending), or IMFOLT/BMFOLT; and complete Form 5344, Examination Closing Record, Line 411 as follows:

Checks or money orders should be payable to United States Treasury with the taxpayer’s SSN or EIN and tax year in the memo. For checks with incorrect payee, see IRM 3.8.44.6.2, Remittance Not Payable to United States Treasury.

Complete Form 3244-A, Payment Posting Voucher - Examination, for checks or money orders received as follows:

See IRM 4.4.24.8, Payments of $100,000 or More, for employee and manager responsibilities for payments over $100,000. Send email to: &CTR ODN Ogden Tellers with Large Remittance in subject line. Include the package tracker number but do not include Personally Identifiable Information (PII) or Sensitive but Unclassified (SBU) information in the email.

If critical errors are made, the examiner’s manager will be informed as stated in IRM 3.8.47.7.1, Critical Errors. The manager will access Form 5919, Teller’s Error Advice through e-Trak 809 Database System and contact the examiner for necessary corrective actions and respond in e-Trak.

Form 3210 should be acknowledged within 10 business days. See IRM 1.4.40.4.2.6, Shipment of Returns. If the acknowledgment copy of Form 3210 is not received within 10 business days, the sender will immediately contact the Campus processing site.

In all unpaid cases (agreed and unagreed), financial data about the taxpayer gathered during the examination should be recorded on Form 9440, Taxpayer Levy Source and Contact Information, to assist in future collection efforts. If the examiner is aware of more current financial information this may be included but should not be solicited from the taxpayer.

Form 9440 is not required on fully paid cases. A case is fully paid if the tax, penalties, and interest are all paid in full, including outstanding deficiencies in other periods. Form 9440 is not required if an installment agreement is secured which will pay in full the deficiency and any other account balances within the term of the agreement.

Form 9440 should not contain taxpayer identification numbers for employers or financial institution account numbers. It should only include the full names and complete addresses of the sources.

Do not include information already available through IDRS or other internal sources. For example, if a taxpayer has wages on the IRPTR from prior years, this employer would not be listed on Form 9440.

For IMF taxpayers, employers and financial institutions will be the primary levy sources. For BMF taxpayers, levy sources include financial institutions and accounts receivable if applicable.

Check the Form 9440 box on Form 3198, Document Transmittal, to notify Exam CCP to pull the form and input.

Form 9440 is placed in the case file on top of all other documents enclosed within the case file. See IRM 4.10.9.9.3, Forms and Other Documents Inside the Case Folder.

Upon receipt of a closed case, Exam CCP will enter the information contained on the Form 9440 into IDRS using the LEVY command code.

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The examiner will initiate the referral to Collection when they believe the final amount due will be agreed and the total unpaid liability will be more than the threshold amount. Field Collection will notify the examiner within 10 calendar days whether the referral is accepted or rejected. The examiner may close the case once the referral is sent. The activity record should include documentation of the referral date and response, if known at the time of closure.

If the taxpayer requests an installment agreement which is beyond Examination’s criteria, see IRM 4.20.1.4.7.

Any informal consultations can be coordinated by the Examination manager and the Collection manager using the buddy system as described in Memorandum of Understanding Between SB/SE Field Collection and SB/SE Field Examination effective September 1, 2018, found at: https://portal.ds.irsnet.gov/sites/vl051/RelatedResources/MOU%20-%20Collectibility%20(final).pdf

For agreed closures, the following should be documented on the appropriate lead sheet as stated in IRM 4.20.1.2.4:

For unagreed closures, the following actions should be taken and documented on the appropriate lead sheet as stated in IRM 4.20.1.2.4:

To qualify for an installment agreement, taxpayers must be current in filing of all required tax returns, including employment and excise tax. All required period deposits (FTDs and/or estimated payments) must be current. Inform the taxpayer they must remain tax compliant for the entire term of the installment agreement, or it will default. Use the following IDRS command codes to determine if the taxpayer is compliant, including cross-referenced taxpayer identification numbers displayed on Master File:

Installment agreements must include the taxpayer’s total amount owed, including civil penalties (MFT 13, 35, 55). Exam deficiencies can be added to an existing installment agreement (write Revised Agreement in red on top of Form 433-D, Installment Agreement) if the total amount remains within Exam’s criteria as shown below. If the taxpayer is still in business with employees, unpaid employment tax or other BMF liabilities cannot be combined in an exam installment agreement.

Installment agreements secured by Examination are pre-assessment agreements and limited to:

Examiners are authorized to set up two types of installment agreements. The dollar criteria stated below applies to unpaid balances for all tax years. Authorized installment agreements are:

The taxpayer must be able to pay the minimum acceptable payment as stated in IRM 4.20.1.4.3, for streamlined installment agreement and IRM 4.20.1.4.4, for guaranteed installment agreement. However, the examiner should encourage the taxpayer to offer the maximum amount they can pay at the examination closing and each month thereafter.

A payment received to reduce the balance to within installment agreement criteria is processed as an advance payment of deficiency. IRM 4.20.1.3.2.

Encourage the taxpayer to utilize the online payment agreement (OPA). See IRM 21.2.1.57, Online Payment Agreement (OPA) for IMF Debts and IRM 21.2.1.57.1, Online Payment Agreements for Certain BMF Debts. Online agreements offer reduced user fees. Examiners should refer taxpayer to: https://www.irs.gov/payments/online-payment-agreement-application and provide Pub 5123, Online Payment Agreement. When the taxpayer completes the online payment application, the examiner should confirm input of the OPA by requesting confirmation from the taxpayer or verify using another method. Complete Line 412 on Form 5344, Examination Closing Record, with “I” for installment agreement secured.

The examiner must complete the following when a "How to Pay Your Taxes" flyer generated by RGS is received from the taxpayer:

A completed Form 9465 secured from a taxpayer can be processed by Collection as an installment agreement if all information is correct and the taxpayer’s offered amount meets Exam’s criteria.

Streamlined installment agreements are termed "streamlined" because they do not require a financial statement (Form 433-B, Collection Information Statement for Businesses, or Form 433-F, Collection/Information Statement). Therefore, for simplicity the term installment agreement used in this section will imply streamlined installment agreement.

Installment agreements may be secured where the total unpaid balance (including interest and penalties) of assessments (all years) does not exceed $50,000 and can be paid off within a 72 month period and prior to the CSED.

Agreements of $25,000 or less can be secured for:

The following limitations apply for agreements of $25,001 - $50,000:

The minimum acceptable payment:

If the taxpayer has the financial ability to pay off the balance due in less than a 72 month period, the lesser period should be appropriately considered. However, the taxpayer may be granted an installment agreement based on 72 months even if they are able to fully pay their accounts.

Examiners should inform taxpayers of the user fees the IRS is required to charge associated with an installment agreement. See http://serp.enterprise.irs.gov/databases/irm-sup.dr/ia-user-fee-codes.html. User fees also apply to revised agreements.

The fees will be taken from the first installment payment. Examiners should advise the taxpayer that if the first payment is less than the user fee, the first reminder notice they receive will be for the user fee. The user fees are non-refundable in most situations.

IRC 6159, Agreements for payment of tax liability in installments, provides that certain taxpayers who meet specified criteria are legally entitled to an installment agreement. The provision applies to individual taxpayers only.

Guaranteed installment agreements are for tax only up to $10,000 that can be paid in 36 months. Taxpayers qualifying for a guaranteed installment agreement would generally also qualify for a streamlined installment agreement. Accordingly, examiners should use streamlined installment agreement procedures to process guaranteed installment agreement.

See IRM 5.14.5.3, Guaranteed Installment Agreements for procedures.

Determine total amount owed: Use SUMRY to determine if the taxpayer has any outstanding tax liabilities to combine with the pre-assessed amount to calculate the installment agreement limitation. The total amount of tax, penalty, and interest as of the date the form is completed is included in the Amount Owed As Of box. Only one installment agreement is allowed per taxpayer; therefore, multiple years are combined for the amount owed.

The taxpayer may select any installment payment date between the 1st and 28th day of each month.

Form 433-D, Installment Agreement can be completed using RGS. See Knowledge Management at: https://portal.ds.irsnet.gov/sites/vl051/lists/collectibilityconsiderationandrelatedtopics/landingview.aspx.

Complete all line items on Form 433-D unless noted otherwise. Line items requiring additional explanations are noted below:

Provide taxpayer with instructions on Where to Mail Payments at: http://serp.enterprise.irs.gov/databases/who-where.dr/campus-balance-due-accounts.html?bod=3&state=All&stateRow=1&b1= until CP521 notices are received. Taxpayers can also make payments online. Provide Part 2 of Form 433-D, Taxpayer Copy, including taxpayer instructions.

Notate Form 3198 under Other Instructions in the Special Features portion, that an installment agreement is enclosed in the case file under Forms Enclosed. Form 433-D is placed on top of Form 5344, for the earliest return under examination. Exam CCP will forward Form 433-D to CSCO in Memphis for processing. Include a copy in the workpapers.

IRC 7122(e), Compromises, provides appeal rights to taxpayer whose request for an installment agreement is rejected. Examination does not have the authority to reject installment agreements. If a taxpayer requests an installment agreement that is not within the examiner’s scope, see IRM 4.20.1.4.7.

If a taxpayer requests an installment agreement that does not meet Exam’s criteria, the examiner should solicit Form 9465, Installment Agreement Request from the taxpayer to leave in the case file for Exam CCP to forward to CSCO in Memphis for processing:

If not already completed, and the taxpayer qualifies, Form 3177, Notice of Action For Entry On Master File must be input for a pending installment agreement. See IRM 4.20.1.4.2.1.