4.20.4 Installment Agreements

Manual Transmittal

October 04, 2017


(1) This transmits revised IRM 4.20.4, Examination Collectibility, Installment Agreements.

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 Expanded to include requirements of IRM, Address Management and Internal Controls, and discussion of streamlined and non-streamlined installment agreements were moved to
IRM Title was changed to Authority and Procedures. This subsection now contains overall authority and procedures for securing installment agreements.
  • IRM summarizes the two types of installment agreements examiners are authorized to secure, including increase for Exam authority from $25,000 to $50,000.

  • IRM summarizes procedures for amounts over $25,000.

  • IRM describes examiner's actions when the taxpayer requests an installment agreement.

  • IRM removed instructions for taxpayer's request for installment agreement outside exam's authority. This information was moved to new subsection IRM

IRM Clarified computation of monthly payment. Removed user fee amounts and referenced website for current amounts.
IRM Added Note regarding Service's policy.
IRM Instructions for completing Form 433-D are clarified.
IRM Removed detail for requests outside exam's authority and referenced IRM instead.
IRM Subsection added to encompass all instructions for requests for installment agreements outside exam's criteria.
IRM Deleted subsection and moved to IRM

Effect on Other Documents

This material supersedes IRM 4.20.4, dated February 26, 2013.


SB/SE Field and Specialty Examiners, excluding Estate and Gift Tax

Effective Date


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

Program Scope and Objectives

  1. Purpose. This section provides guidance on Examination's authority and procedures for securing installment agreements.

  2. Audience. This section applies to all 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. The authority to grant installment agreements is extended to other contact functions, including Examination, to improve one-stop service, reduce taxpayer burden, encourage voluntary compliance, and utilize resources more effectively.

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


  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.


  1. By law, the 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 6159, Agreements for Payment of Tax Liability in Installments.

    • IRC 6301, Collection Authority.

    • IRC 6651(h), Limitation on Penalty on Individual’s Failure to Pay for Months During Period of Installment Agreement.

    • IRC 7122(e), Administrative Review.

    • 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.


  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, 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, 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, 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.


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

    Acronym Definition
    AC Action Code
    BMF Business Master File
    CCP Centralized Case Processing
    CSCO Compliance Services Collection Operations
    CSED Collection Statute Expiration Date
    EIN Employer Identification Number
    FTD Federal Tax Deposits
    GCP General Case Processing
    ID Identification
    IDRS Integrated Data Retrieval System
    RA Revenue Agent
    SSN Social Security Number
    TC Transaction Code
    TCO Tax Compliance Officer


  1. The following forms are commonly used within the installment agreement process and are referenced throughout this IRM.

    Form Title
    Form 433-B Collection Information Statement for Businesses
    Form 433-D Installment Agreement
    Form 433-F Collection/Information Statement
    Form 2159 Payroll Deduction Agreement
    Form 3177 Notice of Action for Entry on Master File
    Form 3198 Special Handling Notice for Examination Case Processing
    Form 9465 Installment Agreement Request

Related Resources

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

    IRM Title
    IRM Tiered Interview Approach
    IRM Coordination with Collection
    IRM Processing Payments Received
    IRM Identifying Pending, Approved and Rejected Installment Agreement Proposals on IDRS
    IRM Guaranteed Installment Agreements

Master File Action Codes

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

    TC/AC Definition
    971/043 Pending Installment Agreement
    972/043 Pending Installment Agreement Reversed
    971/063 Installment Agreement in Effect
    971/163 Terminated Installment Agreement (Reverses both TC 971 AC 043 and TC 971 AC 063, both must be present for reversal to occur)

Examination's Authority and Procedures

  1. Installment agreements must be considered after attempts to secure full payment have been exhausted. See IRM, Tiered Interview Approach, for additional information. Document installment agreement efforts under Payment Solicitation as stated in IRM, Examiner’s Responsibilities.

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

    • Individuals, including sole proprietorships, without delinquent employment taxes,

    • Out-of-business BMF entities,

    • Corporations (income tax only), and other BMF entities.


    Installment agreements must include the taxpayers total tax liability. If the taxpayer is still in business with employees, unpaid employment tax or other BMF liabilities cannot be combined in an exam installment agreement.

  3. To qualify for an installment agreement, taxpayers must be current in filing of all required returns. All required period deposits (FTDs and/or estimated payments) must also 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:

    Command Code Description
    ENMOD Displays name, address, and other entity information.
    IMFOLI Provides a quick look at an individual taxpayer’s compliance history for identifying any filed or unfiled returns and outstanding balances.
    IMFOLT Displays various module amounts and dates along with a listing of posted transactions for the specified tax module.
    PMFOL Displays Payer Master File information, such as filing of Forms 1099-Misc and W-2.
  4. Filing requirements may include:

    • Employment tax returns

    • Information returns

    • Highway use tax returns

  5. 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:

    1. Guaranteed Installment Agreements - For individual taxpayers with income tax deficiencies of $10,000 or less (excluding penalties and interest) that can be paid within 36 months. See IRM, Guaranteed Installment Agreements, for guidance.

    2. Streamlined Installment Agreements - For taxpayers with tax deficiencies of $50,000 or less (including tax, penalties, and interest) that can be paid within 72 months. See IRM, Streamlined Installment Agreements, for guidance.

  6. Examiners are not authorized to set up installment agreements over $50,000:

    1. For amounts between $50,001 and $100,000, Non-Streamlined Installment Agreement procedures apply. See IRM, Non-Streamlined Installment Agreements.

    2. A Collection referral is mandatory for agreed unpaid cases over $100,000. See IRM, Coordination with Collection, and IRM

  7. When the taxpayer requests an installment agreement, or indicates they would like to set up a payment plan, the examiner must determine if the taxpayer qualifies for an installment agreement under requirements of IRM, Identifying Pending, Approved, and Rejected Installment Agreement Proposals on IDRS, before requesting input of a Pending Installment Agreement indicator. The taxpayer must:

    1. Propose a monthly or other periodic payment of a specific amount and

    2. Be in compliance with filing requirements (see IRM, Six-Year Rule and One-Year Rule.)

  8. If the taxpayer meets the requirements the examiner will, within 24 hours, request input of Pending Installment Agreement indicator by completing Form 3177, Notice of Action for Entry on Master File.

  9. The examiner will submit Form 3177 to Collection CCP in Philadelphia by secure e-mail at *CTR PHI CS GCP, or fax to (855) 389-1533, attention: GCP. Examiners should complete the following boxes on Form 3177:

    1. Initiator's name, telephone number, and employee ID

    2. Date

    3. Taxpayer's name

    4. Taxpayer's EIN or SSN

    5. Check the box "Other" and specify TC 971/AC 043 (include the MFT and all tax periods that apply)

  10. If a TC 971/AC 043 was input and:

    1. The taxpayer subsequently does not agree with the proposed deficiency changes, note on Form 3198, Special Handling Notice for Examination Case Processing, under "Other Instructions" in the "Special Features" section, that the taxpayer requested an installment agreement. Appeals will be responsible for securing the installment agreement, if it is required, or ensure its reversal if not required.

    2. If no deficiency is found, request input of TC 972/AC 043 to reverse pending installment agreement indicator.

Streamlined Installment Agreements

  1. Streamlined installment agreements are termed "streamlined" because they do not require a financial statement (Form 433–B, Collection Information Statement for Business or Form 433-F, Collection/Information Statement).

  2. Streamlined 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 the CSED.


    If the CSED of the oldest liability covered by the installment agreement is shorter than 72 months, the installment agreement must be written to allow for full payment of the total unpaid balance prior to the expiration of the CSED.

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

    • Individuals, including sole proprietorships, without delinquent employment taxes,

    • Out-of-business BMF entities,

    • Corporations (income tax only), and other BMF entities.

  4. For agreements of $25,001 - $50,000, the following limitations apply:

    • Corporations still in business are not eligible.

    • Payments must be made by direct debit (IRM, Direct Debit) or payroll deduction (IRM, Payroll Deduction) and

    • The taxpayer must not have defaulted on an installment agreement in the past 12 months. The examiner can verify the taxpayer has not defaulted on an installment agreement by checking IDRS for absence of TC 971/163 for Terminated Installment Agreement.


    Individual taxpayers filing Form 1040 with Schedule C, E, or F businesses are eligible for streamlined installment agreements IF the related BMF returns (940/941/2290) are current not only in filing, but also in making FTD payments.

  5. The minimum acceptable payment:

    • is computed by dividing the total amount of tax, accrued interest, and penalties by 72,

    • is the monthly amount to be paid over 72 months, and

    • must allow for full payment by the CSED.

  6. 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, taxpayers may be granted streamlined agreements based on 72 months even if they are able to fully pay their accounts.

  7. Examiners should inform taxpayers of the user fees the IRS is required to charge associated with setting up an installment agreement. See https://www.irs.gov/individuals/online-payment-agreement-application for current user fees. User fees also apply to amended or restructured agreements.

  8. The fee will be taken from the first installment payment. Therefore, the first installment payment should be greater than or equal to the user fee. 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 fee is non-refundable even if the taxpayer full pays the account prior to the installment agreement ending date.

Payroll Deduction

  1. Installment payments can be withheld from a taxpayer’s wages and forwarded directly to the IRS by the employer. This form of payment is encouraged for a wage earner taxpayer, particularly if the taxpayer has defaulted on any prior agreement.

  2. To set up a payroll deduction installment agreement:

    1. Complete Form 2159, Payroll Deduction Agreement, rather than Form 433-D, Installment Agreement. Form 2159 should be completed in the same manner as Form 433-D. See instructions at IRM, Completing Form 433-D, Installment Agreement.

    2. Request that the taxpayer pay as much as possible upon entering into the installment agreement.

    3. Request the taxpayer sign Form 2159 and then mail it to the employer for signature. Advise the taxpayer that if Part 1 is not signed by both the taxpayer and the employer and sent in, the agreement will be rejected. The form is returned to the examiner for final processing/forwarding.


      Form 2159 may be mailed to the employer by either the taxpayer or examiner (based on the quickest mode of response). However, if the examiner mails Form 2159 to the employer, the taxpayer's authorization should be obtained before doing so. If the employer will not execute Form 2159 direct debit or general payment procedures should be followed.

    4. Examiners must provide payment address to employers, found at http://serp.enterprise.irs.gov/databases/who-where.dr/balance_due_accounts.htm. Examiners should advise employers to include taxpayers' names and TINs, tax form(s) and period(s) on all remittances.

Direct Debit

  1. Direct Debit is used to have the installment payments directly debited or withheld from a checking account. This is the preferred method of payment, with payroll deduction as a second choice.

  2. To set up a direct debit installment agreement:

    1. Complete Form 433–D per instructions at IRM;

    2. Provide the "bank copy" of the installment agreement to the taxpayer; and

    3. Request the taxpayer initial the appropriate line provided on Form 433–D for direct debit agreements.

  3. Direct debit installment agreements are processed using Electronic Federal Tax Payments System (EFTPS) so there is a longer start-up time. Inform the taxpayer that there may be a delay before the first payment is withdrawn from their bank account. The examiner should give the taxpayer an interim address to mail payments to so they do not miss their first payment while their installment agreement is being processed. See IRM (11) for the link to where to send payments.

Guaranteed Installment Agreements

  1. IRC 6159(c), 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.

  2. 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. However, the minimum payment is determined by dividing the balance due by 36 months.

  3. The following criteria are required for guaranteed installment agreements:

    1. The total amount of the liability (determined without interest, penalties, additions to the tax, and additional amounts) does not exceed $10,000;

    2. The taxpayer (and, if such liability relates to a joint return, the taxpayer's spouse) has not, during any of the preceding 5 taxable years:
      failed to file any return of tax imposed by subtitle A;
      failed to pay any tax required to be shown on any such return; or
      entered into an installment agreement under this section for payment of any tax imposed by subtitle A.

    3. The Secretary determines the taxpayer is financially unable to pay such liability in full when due (and the taxpayer submits such information the Secretary requires to make such determination);

    4. The agreement requires full payment of such liability within 3 years; and

    5. The taxpayer agrees to comply with the provisions of this title for the period such agreement is in effect.


    As a matter of policy, the Service grants guaranteed agreements even if taxpayers are able to fully pay their accounts. See IRM, Streamlined, Guaranteed and In-Business Trust Fund Express Installment Agreements.

  4. Unlike the criteria for streamlined agreements, the dollar limit for guaranteed agreements of $10,000 only applies to tax.

  5. If taxpayers do not qualify for guaranteed agreements, consider streamlined agreements prior to considering other alternatives. Process guaranteed agreements as streamlined agreements.

Completing Form 433–D, Installment Agreement

  1. The IDRS system should be used to determine if the taxpayer has any outstanding tax liabilities to combine with the pre-assessed amounts to calculate the $50,000 limitation for streamlined installment agreement and $10,000 limitation for guaranteed installment agreement.

  2. If the taxpayer already has an installment agreement established for other tax years and the examined period will be added, "Amended Agreement" should be written in red on the top of the Form 433-D.


    See the table at IRM, Master File Action Codes, for installment agreement transaction codes.

  3. If the taxpayer has an established agreement for the examined period and the deficiency amount has changed, "Restructured" should be written in red on top of the Form 433–D.


    The Service is required to notify taxpayers 30 days in advance before altering, modifying, or terminating an installment agreement (excluding jeopardy conditions). The notification must include an explanation as to why the Service is altering, modifying, or terminating the installment agreement. See IRM, Defaults and Terminations: IDRS Monitored Agreements. This notification is not sent by the examiner.

  4. One agreement can be used for multiple years, providing the combined amount owed for all years is less than the prescribed limit for that type of agreement. The total amount of the tax, penalty, and interest as of the date the form is completed is included in the box for the amount of tax owed.


    For a guaranteed installment agreement, although the criteria is $10,000 in tax only, the Form 433-D is completed with the Total Amount Owed (including interest and penalties).

  5. A net balance due may be entered when multiple years include both deficiencies and overpayments. However, include appropriate instructions on Form 3198 to ensure the overpayment is applied to a deficiency period(s).

  6. The taxpayer must be able to pay the minimum acceptable payment as stated in IRM for streamlined installment agreement and IRM 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.

  7. A payment received to reduce the balance to within installment agreement criteria is processed as an advance payment of deficiency. See IRM, Processing Payment Received.

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

  9. Form 433-D should be completed by the examiner to ensure the form is legible (follow instructions on the form).


    Form 433-D can also be completed using RGS. See Job Aids in Installment Agreements at http://mysbse.web.irs.gov/examination/tip/ia/default.aspx.

  10. All lines will be completed unless noted otherwise. Line items requiring additional explanations are noted below:

    1. Kind of Tax (form number) - Type of tax form that was used by the taxpayer (for example, 1040, 1040A, or 1120).

    2. Tax Periods - All periods covered by the agreement (for example, 2015 and 2016)

    3. Employer - Complete name, address, and zip code of the current employer. Include information on Social Security Pension benefits.

    4. For Assistance - The name and address of the local/servicing Campus should be written in space provided. Visit http://serp.enterprise.irs.gov/databases/who-where.dr/sc-addresss-collection-operations.html for the correct address, using the taxpayer’s State code.

    5. Date of Increase/Decrease - This field is used only when a taxpayer establishes an agreement to pay a certain amount and later wants to change the amount. Up to two changes may be made on the installment agreement.


      The taxpayer is able to pay $100 on the assessment each month. Three months from now when he gets a raise, he will be able to pay $150 per month. The date the amount will change, the amount of increase or decrease, and the new installment amount should be documented.

    6. Additional Conditions - type in "Print your SSN, tax year, and form number on all checks submitted for payment" .

    7. Direct Debit - only completed if the taxpayer requests payments by direct debit.

    8. Taxpayer Signature and Date. If the agreement is established by telephone, "by phone" should be noted in signature block.

    9. Use the following table to complete the FOR IRS USE ONLY section of the installment agreement:

      Agreement Locator Number First 2 digits = 06 for installment agreement not including direct debit Installment Agreement
      First 2 digits = 03 for Direct Debit Installment Agreement
      Last 2 digits = 32
      Exhibit 5.14.1-2, Installment Agreement Locator Numbers.
      Check the appropriate boxes RSI 1 no further review Since installment agreements secured by examination are not partial pay installment agreements (PPIA), no review is necessary
      Agreement Review Cycle Leave blank N/A
      Earliest CSED MM/DD/YYYY Earliest CSED from IMFOLT/BMFOLT
      Check box if pre-assessed modules included Check box All exam installment agreements are pre-assessed
      Originator’s ID number XXXXXXXXXX Examiner badge number
      Originator Code 61 Exam Streamlined Agreement
      Name Examiner name  
      Title RA or TCO  
      A Notice of Federal Tax Lien May Be Filed if This Agreement Defaults  
      Approval Signature Examiner may sign; group manager signature is not required  
  11. The examiner must provide the taxpayer with a copy of the installment agreement and instructions on where to mail monthly payments until Notice CP 521, Installment Agreement Reminder, notices are received. See: http://serp.enterprise.irs.gov/databases/who-where.dr/balance_due_accounts.htm.

  12. The examiner should 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. The examiner should include a copy of Form 433-D in the workpapers.

  13. Form 433-D should remain in the case file. Examination CCP will forward to CSCO in Memphis upon closure of the case.

Appeal Rights - Installment Agreements

  1. IRC 7122(e), Compromises, provides appeal rights to taxpayers 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 of authority to approve, see IRM

Non-Streamlined Installment Agreements

  1. If an individual taxpayer requests an installment agreement that does not meet Examination's criteria, the examiner should solicit the following from the taxpayer:

    • Form 9465, Installment Agreement Request and

    • Form 433-B, or

    • Form 433-F.


    Examiners are not required to verify information on Form 433. The examiner's role is to collect the information while working with the taxpayer for quicker processing by Collection when it is received.

  2. If not already completed, Form 3177 should be input for a pending installment agreement. See IRM, Examination’s Authority and Procedures, for instructions.

  3. Form 9465 and appropriate Form 433, if received, is left in the case file for Exam CCP to forward to CSCO in Memphis.

  4. If the examiner receives a written request for an installment agreement without Form 433-D or Form 9465, such as a completed "How to Pay Your Taxes" flyer generated by RGS, the examiner should:

    • Determine if the taxpayer’s offered amount meets exam’s criteria for securing an installment agreement. If so, the examiner should contact the taxpayer to pursue an agreement on Form 433-D following IRM

    • If the taxpayer does not qualify for an installment agreement under Exam’s criteria, follow instructions for Form 9465 in IRM (3).

  5. If the taxpayer is unable or unwilling to provide the examiner with Form 9465 and/or Form 433-D the examiner may coordinate with Collection using locally established procedures. A referral is mandatory for agreed, unpaid cases over $100,000. See IRM

  6. If an individual taxpayer owes $50,000 or less in combined tax, penalties, and interest and has filed all required returns; examiners may direct the taxpayer to https://www.irs.gov, to apply for an Online Payment Agreement. Online agreements offer reduced user fees. Business taxpayers owing $50,000 or less can also apply. Taxpayers may also qualify for a short term agreement if the balance is under $100,000. For more information, examiners should refer taxpayers to https://www.irs.gov/individuals/online-payment-agreement-application.