4.20.3 Soliciting Payment

Manual Transmittal

October 04, 2017

Purpose

(1) This transmits a revision of IRM 4.20.3, Examination Collectibility, Soliciting Payment.

Material Changes

(1) Minor editorial changes have been made throughout this IRM. Website addresses, legal references, and IRM references were reviewed and updated as necessary.

(2) Material changes to the IRM are listed in the table below:

IRM Reference Description of Change
IRM 4.20.3.1 Expanded to include requirements of IRM 1.11.2.2.5, Address Management and Internal Controls.
IRM 4.20.3.2 Includes online payment instructions for cash and credit/debit cards.
IRM 4.20.3.3 Includes changes to information to be included on Form 9440.
IRM 4.20.3.4 Revised to remove requirements for Collection referral for agreed unpaid cases up to $100,000 and when taxpayer requests installment agreement beyond Examination’s criteria.
IRM 4.20.3.5 Revised for clarification.

Effect on Other Documents

This material supersedes IRM 4.20.3, dated December 30, 2010.

Audience

SB/SE Field and Specialty Examination, excluding Estate and Gift Tax.

Effective Date

(10-04-2017)

Michael W. Damasiewicz
Director, Examination - Field and Campus Policy
Small Business/Self Employed

Program Scope and Objectives

  1. Purpose. The purpose of this section is to outline examiner’s responsibilities for collecting assessments. It provides guidelines for using the tiered interview approach for soliciting payment, securing levy source information, and coordinating with Collection.

  2. Audience. These procedures apply to all SB/SE Field and Specialty examiners, excluding Estate and Gift Tax.

  3. Policy Owner. The Director, Examination Field and Campus Policy, which is under the Director, Headquarters Examination.

  4. IRM Owner. Field Examination Special Processes (FESP), which is under the Director, Examination Field and Campus Policy.

  5. Primary Stakeholders. SB/SE Collection Division is the primary stakeholder of the examination collectibility program.

  6. Contact Information. To recommend changes or make any suggestions related to this IRM section, see IRM 1.11.6.6, Providing Feedback About an IRM Section - Outside of Clearance.

Background

  1. This IRM provides an overview of 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 during the pre-contact, audit, and closing phases of an examination. The keystone of our compliance activities is to promote voluntary compliance, and examinations contribute to that by having an impact on changing taxpayer behavior and also providing a deterrent to other potentially noncompliant taxpayers.

Authority

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

    • IRC 6155, Payment on notice and demand.

    • IRC 6301, Collection Authority.

    • IRC 7801, Authority of Department of the Treasury.

  2. Also, the following policy statements:

    • IRM 1.2.13, Policy Statements for the Examining Process.

    • IRM 1.2.14, Policy Statements for Collecting Process Activities.

Responsibilities

  1. 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.

  2. The Director, Examination - Field and Campus Policy (formerly known as the Director, Examination AUR/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, Exam/AUR Policy, for additional information.

  3. 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.

Program Reports

  1. Periodic program reviews are conducted by FESP to:

    • Assess the effectiveness of specific programs within Examination or across the organization,

    • Determine if procedures are being followed,

    • Validate policies and procedures, and

    • Identify and share best/proven practices.

Acronyms and Codes

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

    Acronym/Code Definition
    BMFOLI Provides a quick look at a business taxpayer’s compliance history for identifying any filed or unfiled returns.
    CCP Centralized Case Processing
    IDRS Integrated Data Retrieval System
    IMFOLI Provides a quick look at an individual taxpayer’s compliance history for identifying any filed or unfiled returns.
    IRPTR Information Returns Processing Transcript Requests (IRPTR) allows IDRS users to request either online or hardcopy Information Returns Processing (IRP) transcripts from the Information Returns Master File (IRMF).
    TXMOD Requests a display of tax information for a specific Individual Master File (IMF) module.

Related Resources

  1. The following table contains related IRMs which cover additional procedures that examiners may use in the payment solicitation process and are referenced throughout this IRM section:

    IRM Title
    IRM 1.4.40.4.2.6 SB/SE Field and Office Examination Group Manager -Shipment of Returns.
    IRM 3.8.44.4.2 Campus Deposit Activity -Remittance Not Payable to United States Treasury.
    IRM 4.4.24 AIMS Procedures and Processing Instructions - Payments and Remittances.
    IRM 4.10.9.9.3 Workpaper System and Case File Assembly -Forms and Other Documents Inside the Case Folder.
    IRM 4.20.1.2 General Collectibility Procedures -Examiner’s Responsibilities.
    IRM 4.20.4 Examination Collectibility -Installment Agreements.
    IRM 5.1.2.6.3 Remittances, Form 809 and Designated Payments -Check or Money Order Payments.
    IRM 5.1.2.6.3.1 Remittances, Form 809 and Designated Payments - Overstamping or Endorsing.

Tiered Interview Approach

  1. At the beginning of the examination, taxpayers should be advised that if a deficiency results, payment will be solicited and payment options explained at the conclusion of the examination.

  2. Once the examination has been completed, the primary objective of the examiner is to obtain FULL payment of the deficiency.

  3. During the closing conference, payment for agreed deficiency cases should be solicited and secured whenever possible. Prior to giving the taxpayer a payoff figure, obtain a TXMOD and IMFOLI (or BMFOLI) to determine if any outstanding balances are due from other tax years. If the taxpayer has other balances due, the examiner should advise the taxpayer of the other balances and the current examination deficiency (particularly if an installment agreement is prepared).

  4. For unagreed cases, payment may also be solicited and the benefits of making a payment or posting an "IRC 6603 deposit" may be explained to the taxpayer (i.e. stopping the accumulation of interest). See Rev. Proc. 2005-18 for background. See IRM 4.4.24.6, IRC Section 6603 Deposits (formerly known as Cash Bond), and IRM 4.4.24.6.1, Is The Remittance a Payment of Tax or a IRC Section 6603 Deposit?, for specific procedures.

  5. The taxpayer should be informed of the following benefits of making a current payment:

    1. Decrease future interest that is compounded daily;

    2. Interest and the failure to pay penalty will begin to accrue if the tax is not paid within 21 days from the date of the first notice (10 business days if the amount for which such notice and demand is made equals or exceeds $100,000); and,

    3. Personal interest is non-deductible.

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

    1. The total amount you owe which includes tax, estimated interest, and penalties is $_____. Are you going to pay by check, money order, or another method? (Cash, credit and debit card, and direct debits from bank accounts can be made by following instructions on https://www.irs.gov/payments.)

    2. Given that full payment cannot be made today, what is the maximum amount that you can pay today?

    3. Can you make full payment upon receipt of the first notice or within 120 days?

  7. Examiners must explore all of the taxpayer's options for FULL payment prior to discussing any other alternatives for payment. Sources to be considered for making full payment include, but are not limited to, checking account(s), saving account(s), loans (home equity, business loan, relatives, etc.), credit card checks/withdrawals, liquidation of assets (current or long term), gifts, etc. Publication 594, The IRS Collection Process, may be used to explain payment options to the taxpayer.

  8. If the taxpayer meets installment agreement criteria, an installment agreement should be secured. See IRM 4.20.4, Installment Agreements.

  9. If the taxpayer states a willingness to pay but is unable based on the tiered interview and does not meet the installment agreement criteria, the examiner, through their manager, may involve Collection. See IRM 4.20.4 for installment agreement options.

  10. For agreed closures, the following should be documented on the appropriate lead sheet as stated in IRM 4.20.1.2, Examiner’s Responsibilities:

    1. Whether any payment was made,

    2. Installment agreement discussion, including why one was not obtained,

    3. The taxpayer was advised to respond to the first notice,

    4. The taxpayer was provided with Publication 3498, The Examination Process,

    5. Whether or not Form 9440, Taxpayer Levy Source and Contact Information, was completed in accordance with the requirements found in IRM 4.20.3.3.

  11. For unagreed closures, the following procedures should be documented on the appropriate lead sheet as stated in IRM 4.20.1.2, Examiner’s Responsibilities:

    1. The examiner should advise the taxpayer of "IRC 6603 deposit" procedures and complete Form 9440. The taxpayer should also be reminded that this does not prevent them from exercising their appeal rights.

    2. If the taxpayer disagrees with some, but not all issues, the examiner should encourage the taxpayer to enter into a partial agreement and should follow the steps outlined above for securing payment on the partial agreement.

Securing Collection Information - Form 9440

  1. In all unpaid cases (agreed and unagreed) financial data about the taxpayer should be included in the case file and recorded on Form 9440, Taxpayer Levy Source and Contact Information, to assist in future collection efforts. The information for completion of the form will be based on the facts developed during the examination and from inspection of subsequent year returns. If the examiner is aware of more current financial information this may be included but should not be solicited from the taxpayer. Only financial information through the tax year under examination may be solicited.

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

  3. When multiple levy source information is available, the entries should be prioritized in the order most likely to result in collection. 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.

    Note:

    If no additional levy sources are identified, the Form 9440 is not required. However examiners must document the case file following guidance in IRM 4.20.1.2(8).

  4. If the case is fully paid, Form 9440 will not be included in the examiner's workpapers. A case is fully paid if the tax, penalties, and interest have all been paid in full, including outstanding deficiencies in other periods.

  5. Form 9440 can contain up to sixteen levy sources, complete additional Forms 9440 as necessary. For IMF taxpayers, the employers and financial institutions will be the primary levy source. For BMF taxpayers, levy sources include financial institutions and accounts receivable.

  6. Check the Form 9440 box on Form 3198, Special Handling Notice for Examination Case Processing, to notify CCP that this form is included in the case file.

  7. Form 9440 should be 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.

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

  9. Form 9440 is not included if an installment agreement is secured which will full pay the deficiency and any other account balances within the term of the agreement.

Coordination with Collection

  1. Coordination with Collection is mandatory for agreed unpaid cases over $100,000 using locally established procedures. If the examination group manager cannot determine which collection group manager to contact, the group manager will contact their territory manager who will then make contact with the appropriate collection territory manager in order to find out which collection group to contact.

  2. The examiner should coordinate with Collection at the earliest point in time they believe the final assessment/deficiency (tax, penalties, and interest) will be in excess of $100,000 using local procedures.

  3. If the taxpayer requests an installment agreement which is beyond Examination’s installment agreement criteria, see IRM 4.20.4.7, Non-Streamlined Installment Agreements.

Processing Payments Received

  1. The applicable regulations under IRC 6311, Payment of tax by commercially acceptable means, requires payment of taxes by check or money order be made payable to "United States Treasury" .

  2. If a check is received that is not made out to "United States Treasury" but reflects one of the "acceptable" forms of payees as listed in IRM 5.1.2.6.3, Check or Money Order Payments, it must be "over stamped" with the words "United States Treasury" . See IRM 3.8.44.4.2, Remittance Not Payable to United States Treasury, and IRM 5.1.2.6.3.1, Overstamping or Endorsing.

  3. Complete Form 3244-A, Payment Posting Voucher - Examination, following guidance in IRM 4.4.24.2, Form 3244-A. Transmit the payment using Form 3210, Document Transmittal, to the remittance processor at the address shown at http://win.web.irs.gov/SP/Programs_Information/Standard_Proce_Webpages/Exam.htm.

  4. For payment over $100,000 see IRM 4.4.24.8, Payments of $100,000 or More.

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