4.20.4  Installment Agreements

Manual Transmittal

February 26, 2013


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


This IRM provides instructions and guidance to examiners for considering collectibility during the examination process, and for soliciting and processing payments at the conclusion of the examination.

Material Changes

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

(2) This IRM was revised to incorporate Interim Guidance Memorandum SBSE-04-0412-021, dated April 11, 2012, Streamlined Installment Agreements, which addresses the time period and length of installment agreements that Examination employees are authorized to prepare as reflected in the table below:

Reference Description of Change
IRM (5) Changed reference from 5 years to 6 years. Clarified directions by adding the terms streamline and unpaid balance of assessment.
IRM (6) Changed reference from 60 months to 72 months. Clarified directions by stating, "the entire liability (including interest and penalties)" instead of "the agreement...."
IRM (7) Changed reference from 60 months to 72 months.
IRM (2) Changed reference from 60 months to 72 months and changed "total assessed tax, penalties, and interest do" to "aggregate unpaid balance of assessments does."
IRM (3) Changed reference from 50 months to 72 months. Also clarified directions by modifying the last sentence to state, "the minimum acceptable payment is the greater of $25, or the amount obtained by dividing the aggregate unpaid balance of assessments by 72, and this payment will pay the entire balance including accruals by the collection statute expiration date (CSED), or the minimum payment required to pay the entire liability including accruals by the CSED."
IRM (4) Changed reference from 60 months to 72 months and added a sentence at the end to clarify when a taxpayer can get 72 months.
IRM (2) Changed reference from 50 months to 72 months.
IRM (1) Changed reference from 60 months to 72 months.

Effect on Other Documents

This material supersedes IRM 4.20.4, dated May 29, 2009. This revision also incorporates Interim Guidance Memorandum SBSE-04-0412-021, dated April 11, 2012, Streamlined Installment Agreements.


SB/SE Compliance Examiners

Effective Date


Bradley Bouton
Director Examination Policy, SE:S:E:EP
Small Business/Self Employed  (02-26-2013)

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

  2. Examination employees can prepare installment agreements with balances up to $25,000 (Streamlined Installment Agreements).

  3. For amounts between $25,000 and $100,000, Non-Streamlined Installment Agreements procedures apply. If the case is an agreed deficiency and the installment agreement does not meet Examination's criteria in paragraphs (1) and (2) above, complete Form 9465, Installment Agreement Request. Request taxpayers to complete Form 433–D, Installment Agreement, and attach it to Form 9465.  (02-26-2013)
Examination's Authority

  1. When the taxpayer requests an installment agreement, Form 433–D, Installment Agreement, or Form 9465, Installment Agreement Request, or indicates that he/she would like to pay any resulting deficiency via installments/monthly payments, the examiner will ensure that Transaction Code (TC) 971, Action Code 043, (for pending installment agreements), is input to IDRS within 24 hours of the taxpayer's request. See IRM, Securing Installment Agreements, for additional guidance on pending installment agreements. These codes should be input regardless of whether Examination secures an Installment Agreement with the taxpayer. These codes are input to IDRS by the examiner faxing Form 3177, Notice of Action for Entry on Master File, to Collection Centralized Case Processing. For more information on where employees should fax Form 3177 visit the Exam Centralized Case Processing internal Intranet site at http://mysbse.web.irs.gov/AboutSBSE/aboutccs/ccsprog/casepro/cp/cont/23510.aspx. 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)

  2. The examiner must check the appropriate box (for either Form 433–D or Form 9465) on Form 3198, Special Handling Notice for Examination Case Processing, to advise Exam Centralized Case Processing (CCP) that an installment agreement is included in the case file. The examiner will place the installment agreement form on top of Form 5344, Examination Closing Record, in the case file. If the examiner received a written request for an installment payment without Form 433–D or Form 9465, the examiner should add a comment under "Other Instructions" in the "Special Features" portion of Form 3198 such as: "Non-Standard Installment Request included in case file. Please forward to Collection CCP."

  3. Installment agreements, Form 433–D, should be considered after attempts to secure full payment have been exhausted. See IRM, Tiered Interview Approach, for additional information.

  4. Installment agreements secured by Examination are pre-assessment agreements and limited to Individuals (IMF) without delinquent employment taxes, out-of-business sole proprietors, and in-business (BMF) taxpayers (Form 1120, "U.S. Corporation Income Tax Return" only).

  5. Generally, streamlined installment agreements cannot be entered into unless the agreement provides for full payment of the unpaid balance of assessment within 6 years and the entire tax liability (including interest and penalties) by the collection statute expiration date (CSED).

  6. Taxpayers must meet the following additional criteria for Examination to secure an installment agreement:

    1. Current in filing all returns: The taxpayer must be in full compliance with the filing of all returns currently due, including cross-referenced taxpayer identification numbers displayed on IDRS and Master File. IMFOLI/T will be used to check for filing of the current period return, ENMOD will verify the taxpayer's address and record of account, and PMFOL should be checked if the taxpayer is required to file payor returns; for example, (Form 1099-Misc, Miscellaneous Income, Form 941, Employer's Quarterly Federal Tax Return Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return etc.). To be able to qualify for an installment agreement the taxpayer must file all delinquent returns. Other liabilities reflected on the delinquent returns should be included with the examination deficiency in the installment agreement.


      It may be impractical to conduct CFOL research in the field. Examiners may prepare the agreement based on the taxpayer’s oral statement that all filing and payment requirements have been met. Examiners should explain to the taxpayer that prior to approval of the installment agreement, research of their account will be conducted. Once approved, Part 1 of Form 433–D will be mailed to the taxpayer.

    2. The aggregate unpaid balance of assessments is $25,000 or less. Command codes SUMRY, IMFOLT, and IMFOLI will be used to check for outstanding liabilities. The unpaid balance of assessments includes tax, assessed penalty and interest, and all other assessments on the tax modules.

    3. If pre-assessed taxes are included, the pre-assessed liability plus unpaid balance of assessments must be $25,000 or less.

    4. The aggregate unpaid balance of assessments will be fully paid in 72 months, or the entire liability (including interest and penalties) will be fully paid prior to the CSED.

  7. Examiners are authorized to set up two types of installment agreements. They are:

    1. STREAMLINED INSTALLMENT AGREEMENTS—For taxpayers with tax deficiencies of $25,000 or less (including tax, penalties, and interest), that can be paid within 72 months. IRM

    2. GUARANTEED INSTALLMENT AGREEMENTS—For taxpayers with income tax deficiencies of $10,000 or less (excluding penalties and interest), that can be paid within 36 months. See IRM


      Examiners will use streamline procedures to process guaranteed installment agreements.

  8. Taxpayers requesting an installment agreement but not meeting the streamlined or guaranteed installment agreement criteria must be referred to Collection using locally established procedures. If no local procedures are in place and the examination manager cannot resolve the issue by making contact with a local collection group manager, the examination manager may contact the Collection Territory Manager that would receive the case in their territory for guidance. A Collection referral is mandatory if the taxpayer requests an installment agreement that does not meet Examination's criteria and for agreed unpaid cases over $100,000. See IRM, Coordination With Collection, for additional guidance.

  9. If the taxpayer requests an installment agreement that does not meet Examination's criteria, Form 9465 should be completed and left in the case file and Form 3198 properly notated. Examination CCP will forward Form 9465 to Collection CCP in Philadelphia (rather than local campus Collection) upon closure of the case.

  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, 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. The agreed deficiency is outside of Examination’s installment agreement authority, complete Form 9465, then leave the installment agreement form on top of Form 5344 in the case file. Request that taxpayers complete Form 433–A, B, D, or F, as appropriate, and attach it to Form 9465. Use Form 433–A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433–B, Collection Information Statement for Businesses, or Form 433–D, Installment Agreement, or Form 433–F, Collection/Information Statement, as appropriate. Verification of information on Form 433 is not required by examiners.

    3. No deficiency is found, request input of TC 972, AC 043 to reverse TC 971 following local procedures.

    4. TC / AC definitions are as follows:
      971 / 043—Pending Installment Agreement
      972 / 043—Pending Installment Agreement Reversed (TC 971 AC 043 input in error)
      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.)  (02-26-2013)
Streamlined Installment Agreements

  1. Streamlined installment agreements are termed "streamlined" because they do not require a financial statement (Form 433–A, Form 433–B, Form 433–D, or Form 433-F)

  2. Streamlined agreements may be secured where the aggregate unpaid balance of assessments does not exceed $25,000 and may be paid off within a 72 month period.

  3. MINIMUM ACCEPTABLE PAYMENT—The amount of the proposed monthly payment must be equal to or greater than the minimum acceptable payment. The minimum acceptable payment is the greater of $25, or the amount obtained by dividing the aggregate unpaid balance of assessments by 72, and this payment will pay the entire balance including accruals by the CSED, or the minimum payment required to pay the entire liability including accruals by the CSED.

  4. 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.

  5. Effective January 1, 2007, the user fees for an installment agreement are:

    • $105 for a new installment agreement.

    • $52 for a new direct debit installment agreement.

    • $43 for taxpayers with income at or below established levels based on the Department of Health and Human Services poverty guidelines. This reduced fee applies to establishing new agreements including agreements where payments are deducted directly from the taxpayer's bank account. All taxpayers entering into an installment agreement will automatically be considered for the reduced user fee using information the IRS already has on hand from the taxpayer’s current tax return.


      Taxpayers whose installment agreement is being restructured or reinstated are not eligible for the reduced fee.

    • $45 to restructure an existing or reinstate a defaulted installment agreement.

  6. 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.  (02-26-2013)
Payroll Deduction

  1. Payroll deduction is used for having the installment payments withheld from wages and the employer forwards the payment directly to the IRS. This form of payment is encouraged for a wage earner taxpayer, particularly if he/she has defaulted on any prior agreement.

  2. To set up a payroll deduction installment agreement:

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

    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.  (02-26-2013)
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. Obtain a blank, voided check from the taxpayer and attach it to Form 433–D;

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

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

  3. Direct debit installment agreements (DDIA) must be sent to a bank (and are also covered by banking regulations) so there is a longer start-up time. The first direct debit date must be at least five (5) weeks from the date the agreement is granted. This allows sufficient time to verify the depository information prior to initiating the first direct debit. Inform the taxpayer of the length of time it may take for the first payment to be withdrawn from their bank account. The examiner can give taxpayers an interim address to mail payments to so they do not miss their first payment while their DDIA is being processed.  (02-26-2013)
Guaranteed Installment Agreements

  1. IRC 6159(c) 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 30 months rather than up to 72 months.

  3. The Secretary shall enter into an agreement to accept the full payment of such tax in installments if, as of the date the individual offers to enter into the agreement.

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

    1. The aggregate amount of such liability (determined without regard to 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 that the taxpayer is financially unable to pay such liability in full when due (and the taxpayer submits such information as the Secretary may require 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.

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

  6. If taxpayers do not qualify for guaranteed agreements, consider streamlined agreements prior to considering other alternatives. Process guaranteed agreements as streamlined agreements.  (02-26-2013)
Completing Form 433–D, Installment Agreement

  1. The IDRS system should be used to determine if the taxpayer has any outstanding tax liabilities and all returns have been filed. If other tax liabilities exist, they must be combined with the pre-assessed amounts to calculate the $25,000 limitation and be paid in full within 72 months for streamlined installment agreements.

  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.

  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.

  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.

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

  6. The taxpayer should be encouraged to offer the maximum amount that he/she can pay at the examination closing and each month thereafter. If the taxpayer proposes a monthly amount, which is equal to or greater than the minimum acceptable payment, the taxpayer's amount should be used. If the amount stated is less than the "minimum amount," the taxpayer should be questioned whether they can pay the minimum.

  7. Any payment received at the time of the examination closing should be processed as an advance payment of deficiency. If a check is received and made out to "Internal Revenue Service" or "Department of Treasury" it will still be accepted and processed. However, before it is processed, the check or money order must be "over stamped" with the words "United States Treasury."

  8. Checks and money orders must be timely transmitted to processing sites via Form 3210, Document Transmittal. If the Form 3210 is not acknowledged within 10 business days, follow up action must be made with the processing site and documented on the retained copy of Form 3210 or Form 3210 logbook. During group reviews, Group Managers and Territory Managers will ensure proper processing and follow up procedures.

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

  10. Form 433–D will include the following information, as applicable, on the appropriate line on the form:

    1. Taxpayer(s) name, current address, and social security number.

    2. Taxpayer(s) phone number(s).

    3. Kind of Tax (form number)—Type of tax form that was used by the taxpayer (e.g. 1040, 1040A, 1120).

    4. Tax Periods—All periods covered by the agreement (e.g. 2003 and 2004).

    5. Amount owed—As discussed above.

    6. CSED (Collection Statute Expiration Date)—The earliest year date should be used and can be found on IMFOLT or TXMOD.

    7. Employer—Complete name, address, and zip code of the current employer. If the taxpayer is drawing Social Security benefits, this should be stated in the space provided. If the taxpayer is retired and drawing a pension, the source should be reflected in the space provided.

    8. Financial Institution(s)—Complete name and address of the taxpayer(s) bank(s), credit union(s), brokerage(s), etc.

    9. For Assistance—The name and address of the local/servicing Campus should be written in space provided. Visit Mailing Address Installment Agreement for the correct address.

    10. Payment Amount—As discussed above. Since the examination deficiency has not been assessed, the pre-assessed box should be checked.

    11. Date of Increase/Decrease—This field is used when a taxpayer wants to establish an agreement paying a certain amount and later wants to change the amount. Up to two changes may be made on the installment agreement.
      (For example: The taxpayer is able to pay $30 on the assessment each month. Three months from now when he gets a raise, he will be able to pay $60 per month. The date the amount will change, the amount of increase or decrease, and the new installment amount should be documented.)

    12. Agreement Locator Number—For examination, the number is "0632" for pre-assessment cases.

    13. Agreement Conditions—This field should be reviewed with the taxpayer. The box, "Lien may be filed if this agreement defaults," should be checked.

    14. Additional Conditions—This section should be used to provide additional information and/or instructions for the taxpayer. For example, "Print your social security number, tax year(s) and form number on all checks submitted for payment on your account," may be reflected in this field.

    15. Taxpayer signature(s) and date. If the agreement is established by telephone, "by phone" should be noted in the signature block.

    16. Originator's Name, Title and IDRS Assignment Number or Territory—Examiner's name, title, group number, and stop number.

    17. Originator Code—61 is used for streamlined/guaranteed installment agreements prepared by Examination.

    18. Approval Signature—Examiners may sign; group manager signature is not required.

  11. The taxpayer is provided with a copy of the installment agreement, instructing him/her where to mail monthly payments.

  12. Form 3198 is notated, 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 clipped to the front of Form 5344 for the earliest return under examination. A copy of Form 433–D will also be enclosed in the workpapers.

  13. Form 433–D should remain in the case file. Examination CCP will forward to Collection CCP in Philadelphia upon closure of the case.  (02-26-2013)
Appeal Rights - Installment Agreements

  1. IRC 7122(e) 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, the request must be referred to Collection for consideration. Transaction Code 971, Action Code 043, should be input to IDRS within 24 hours if an installment agreement is secured or the taxpayer requests one (whichever comes earlier). See IRM for procedures on how to input transaction code.  (02-26-2013)
References for Installment Agreements

  1. References for installment agreements are as follows:

    1. IRC 6159, Agreements for Payment of Tax Liability in Installments

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

    3. IRC 7122(e), Administrative Review

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