Part 5. Collecting Process
Chapter 14. Installment Agreements
Section 3. Deadlines and Payments and Requests for Installment Agreements Made to Delay Collection
Acceptance of an installment agreement request cannot be conditioned on receipt of a series of payments requested (or pledged voluntarily) prior to the granting of an agreement. Therefore, failure to make a requested (or proposed) series of payments is not justification for recommending rejection of proposed installment agreements. Installment payments are required only after installment agreements are approved. A series of requested payments should not be substituted for an installment agreement if the facts of the case indicate an installment agreement is warranted.
The requests for payments discussed in this section will be made if the taxpayer has an ability to pay (based on an analysis of the taxpayer's financial information) and:
there is no planned resolution for the case; or
there is a planned resolution, but no payments will result from that planned resolution until a later date; or
the financial information received from third parties or taxpayers is incomplete or insufficient to determine a disposition for the case but sufficient information exists to request a series of payments; or
the disposition of an asset or assets necessary to reduce the amount of liability subject to agreements will take time; or
there is a necessity to verify financial information received thus far, and documentation or information has been requested from the taxpayer; or
there is a necessity for the taxpayer to file tax return(s) prior to determining eligibility for an installment agreement or other resolution and time will elapse prior to the return filing; or
the taxpayer plans to make payments or requests to make payments pending final disposition of the case.
Request a series of payments when one of the above situations exists if taxpayers are in "balance due" status, including when requests for installment agreements are pending (except when prohibited by stays of collection such as in bankruptcy) unless agreements can be granted immediately. When received, these payments are classified as requested payments, not installment payments.
If installment agreements are not pending, warn taxpayers of enforcement action if payments and/or other information, documentation or required returns are not received. (See IRM 184.108.40.206(8) regarding combining the request for payment with requests for other information or documentation.)
If a series of payments are not requested from (or required of) taxpayers in "balance due" status, they should be encouraged to make a voluntary payment (or payments) at any time, including when requests for installment agreements are pending (except when prohibited by stays of collection such as in bankruptcy.) When received, these payments are classified as voluntary payments, not installment payments.
Unlike installment agreement payments, requested payments may be designated by taxpayers. Unless designated, there is no particular designated payment code (DPC) for these payments.
If installment agreements are pending when requests for payments are made (or when taxpayers are notified that they should make voluntary payments) then advise taxpayers that:
an installment agreement is pending;
the installment agreement must be approved (if applicable);
installment agreements are not granted until taxpayers receive confirmation in writing by issuance of a letter or a signed copy of Form 433D/2159;
acceptance of voluntary or required payment(s) is not to be construed as acceptance of a requested installment agreement;
notification of either acceptance or rejection of an installment agreement request will be provided, prior to any enforcement action; and
no levy action will be taken so long as a payment agreement request is pending.
If payments are requested, this may be in connection with gaining other information, documentation or the request for required returns. (See IRM 220.127.116.11 and IRM 18.104.22.168.1.) Requests must be made using Form 9297, " Summary of Taxpayer Contact" , which may be mailed, hand delivered, or personally given to taxpayers (See IRM 22.214.171.124.2.)
The procedures described in this section may be used:
during any contact with taxpayers (if warranted);
after installment agreements are requested, i.e. while installment agreements are pending; or,
after termination of a prior installment agreement.
The procedures described in this section will not be used:
while installment agreements are in effect; or
during the default period (prior to termination) of installment agreements (except for payments necessary to reinstate agreements.) (See IRM 126.96.36.199 and IRM 188.8.131.52 for applicable time periods.)
Appropriate collection action may be taken if action dates pass without receipt of payments and/or requested returns, (or documentation or information) and an installment agreement is not pending nor in effect (and all appropriate notices, CDP timeframes and other actions have been taken). (See also IRM 5.1.9 regarding CDP, IRM 5.11 regarding levies, IRM 5.8 regarding offers in compromise, and IRM 5.10 regarding seizure and sale.)
If action dates pass without receipt of payments, and an installment agreement is pending, approval of the installment agreement should be considered on its merits, regardless of whether the series of payments was received. No collection action may be taken until after:
the request for an installment agreement is recommended for rejection;
an independent administrative reviewer agrees rejection should be conveyed to the taxpayer (see IRM 184.108.40.206);
rejection is conveyed to the taxpayer; and,
appropriate appeal timeframes (or appeals) have expired (see IRM 220.127.116.11.)
Installment agreements are not considered pending if the direction provided in IRM 18.104.22.168 applies.
If payments are received as requested, but action dates pass without receipt of deposits or estimated tax payments or documentation or information, and an installment agreement is pending, inform the taxpayer that the installment agreement will be recommended for rejection based on non-receipt of requested items, then refer the case to the independent administrative reviewer recommending rejection.
No collection action may be taken (based on the reasons provided above) until after an independent administrative reviewer agrees rejection should be conveyed to the taxpayer (see IRM 22.214.171.124); rejection is conveyed to the taxpayer; and appropriate appeal timeframes (or appeals) have expired (see IRM 126.96.36.199.)
After the actions described in IRM 188.8.131.52(13)(a), and if all other appropriate notices, CDP timeframes and other actions have been taken, appropriate collection action may be taken.
An installment agreement should be approved if the taxpayer met all deadlines and satisfied all commitments and requirements precedent to the granting of the installment agreement. If, however, the taxpayer misses the periodic payment portion of deadlines (see above) while the agreements are pending, the agreement should still be approved.
If taxpayers fail to make equity-based payments (like the one described in Example B below) rejection will be recommended.
The following examples illustrate some situations where the procedures provided above should be followed:
Example A: On March 21, 2007, Mr. B meets with the revenue officer (RO) regarding tax liabilities totaling $200,000 for two years, and unfiled tax returns for two other years. The RO demands full payment of the tax liabilities and delinquent returns, but Mr. B states that he is unable to pay. Form 433A is completed at the meeting. It indicates an ability to pay $5,000 per month and that Mr. B has equity in property. Therefore, an installment agreement may not be appropriate due to the equity in the property. The RO discusses a realistic plan for case resolution that includes borrowing against or selling property in which the taxpayer has equity. The RO advises the taxpayer that the NFTL will be filed and provides the taxpayer with information regarding lien subordinations and discharges. The RO establishes deadlines for action by giving Mr. B the Form 9297, providing dates by which Mr. B must take the following actions:
April 15: file tax return or extension with proof of payment for 2006.
April 22: make payment of $5,000 and file original, signed Forms 1040 for tax years ending 2003 and 2004.
May 21: payment of funds realized from borrowing on or selling the property that the taxpayer has equity in; or provide proof of two attempts to secure an equity loan on property, provide copies of his last two months ’ bank statements, and make payment of $5000. The RO warns Mr. B of the consequence of missing any of the above deadlines, and informs him that the above deadlines for payment do not constitute an installment agreement. Mr. B states he will comply with the RO’s requests and leaves the office. The plan of action should be recorded in the case history that the RO will file the NFTL; the RO will process the delinquent returns filed or will proceed with SFR if the taxpayer fails to file the returns as requested; the RO will analyze the financial information to determine collectibility and appropriate case resolution; the RO will proceed with appropriate enforced collection action if the taxpayer fails to make payments as agreed or fails to provide verification of attempts to secure an equity loan on property or fails to provide the bank statements.
The taxpayer does not have a "pending" installment agreement and has been given deadlines. If the deadlines are not met, appropriate enforcement action may begin, if all notices have been given.
Example B: This example is identical to Example A above except that before leaving the office, Mr. C requests an installment agreement in the amount of $5,000 per month. The RO informs Mr. C that the request will be considered contingent upon having filed all tax returns and deposits, and the timely filing of returns and deposits due during the "pending" periods. Prior to acceptance, the taxpayer will likely be required to borrow on the equity in the property, and provide other information (see (a) above). She also informs Mr. C that the required payments of $5,000 per month should be made while the agreement request is being considered. She warns Mr. C of the consequences of non-receipt of requested information, but also informs Mr. C that no levy action will be taken so long as an installment agreement request is pending and that Mr. C will receive notification of either acceptance or rejection of his installment agreement request prior to any enforcement action. All of the above is documented in the case history.
Although no enforcement action can be taken based on missed deadlines while installment agreements are pending or in effect, payments and other information are requested. If the taxpayer uses equity in assets to make a large payment, and provides requested information and returns, the installment agreement will be recommended for approval, even if the payments of $5,000 per month are not made. If the equity in property is not used to make a payment, or returns and/or information is not received, rejection of the installment agreement will be recommended. (The taxpayer was informed of this.) Collection action can be taken only after independent administrative review and appeals timeframes have elapsed.
Information related to "Setting Deadlines and Receiving Payments" is available in:
IRM 5.1.9 (regarding CDP);
IRM 184.108.40.206.9(4) (Notice of Levy);
IRM 5.8 (regarding Offers in Compromise); and,
IRM 5.10 (regarding Seizure and Sale.)
If taxpayers request installment agreements that meet the criteria in this section:
requests will not be recognized;
requests will not be identified as "pending" ;
input of TC 971 AC 043 will not be requested nor completed; and,
because the agreement request is not valid, it is unnecessary to reject the request. Because it is not rejected, neither an independent review nor appeal (CAP) of a rejection are appropriate. Such appeals will not be accepted.
Taxpayers still have the right to meet with managers, request appeals of levy, or contact the Taxpayer Advocate. If levies are issued after following the procedures provided in this section, even though there is no appeal regarding the installment agreement. Taxpayers have the right to discuss levies with managers, appeal levy actions or contact the Taxpayer Advocate. (See note in IRM 220.127.116.11(8)).
To identify whether requests are made to delay collection (or enforcement) action at least one of the following must apply:
There is no economic reality to the request (see IRM 18.104.22.168(3)(a)); or
The request does not address changes requested in response to a prior request; (see IRM 22.214.171.124(3)(b)); or
The request ignores direction provided by revenue officers (see IRM 126.96.36.199(3)(c)); or
The request is made by a taxpayer that has defaulted prior installment agreements; (see IRM 188.8.131.52(3)(d)); or
The request is made at a time that causes it to be classified as a request made to delay enforcement action (see IRM 184.108.40.206(3)(e)).
An installment agreement request that qualifies as a guaranteed installment agreement should be processed even if submitted solely to delay collection. (There is no exception in IRC 6159(c) for request made solely to delay collection.)
As provided in IRM 220.127.116.11(1) and IRM 18.104.22.168(2), " pending" status will not be identified if:
there is no economic reality to the request. This applies if the proposed monthly payment amount is nominal (for example $1 per month) or so small it does not come close to reflecting the taxpayer ’s ability to pay or it is made without reference to ability to pay after such reference is requested.
If balance due accounts meet Guaranteed or Streamlined criteria – see IRM 5.14.5 – these agreements will be granted.
the request does not address changes requested in response to prior requests. If, after rejection of prior installment agreement request(s), taxpayers submit new requests that are not materially different from the prior request or requests, or do not address modifications (for example, taxpayers were provided acceptable monthly payment amounts), or do not address previously disallowed or undocumented expenses, then the (subsequent) request or requests do not result in identification of a pending installment agreement.
the request ignores direction provided by revenue officers . When revenue officers request that taxpayers fully pay accounts (based on financial statement analysis) or submit documentation to support analysis of a financial statement, yet this direction is not followed. When the taxpayer fails to comply with one of these requests and then subsequently requests an installment agreement, this is considered a delay action.
the request is made by a taxpayer that has defaulted on prior installment agreements. If taxpayers request installment agreements after a default of a prior agreement, the new agreement request will not result in identification of a "pending" agreement if: (1) the ability to pay has not changed since default of the prior agreement or (2) the taxpayer has demonstrated a history of non-compliance with Federal Tax Deposit requirements, ES payment requirements, proper payroll withholding, or filing tax returns when due.
the request is made at a time that causes it to be classified as a request made to delay enforcement action: See IRM 22.214.171.124.9 regarding levies relative to pending and active installment agreements. See IRM 5.10 regarding Seizure and Sale. See the important note below regarding requests for agreements in the case of sale of property.
Installment agreement requests do not prohibit the sale of property that was seized before an agreement became pending. If a sale is scheduled, and a taxpayer subsequently requests an installment agreement then, even if the agreement is identified as "pending" , the sale may continue.
The taxpayer should be notified that the IRS will not process the installment agreement request.
Examples of situations that do not result in identification of "pending" status:
Example A: The taxpayer previously requested an installment agreement for $700 per month and the request was rejected by the independent reviewer. The taxpayer was told when the rejection was communicated that an acceptable agreement would be $1000 per month. This amount was fully explained and also discussed with the group manager. The taxpayer now offers $725 per month, with no change in circumstances since the rejection. The subsequent request constitutes a delay action.
Example B: The taxpayer previously had a request for an installment agreement rejected. The case has proceeded to seizure and sale of the taxpayer’s assets. At the sale, five months after the rejection of proposed installment agreement, the taxpayer requests another installment agreement. The sale may continue. (See IRM 126.96.36.199(3)(e) and IRM 5.10 – Seizure and Sale.)
In this example, even if the request for an agreement does qualify for identification as a pending installment agreement, the sale may continue. Guidance for releasing and returning property can be found in IRM 188.8.131.52.
Example C: The taxpayer has the ability to fully pay the liability and there are no reasons why assets can not be used to fully pay taxes (see IRM 184.108.40.206 (6) and IRM 220.127.116.11(7)). The independent reviewer rejected a prior request based on the taxpayer’s ability to fully pay the liability. The taxpayer proposes another installment agreement amount. There is no change in taxpayer circumstances since the rejection. This subsequent request is considered to be one made to delay collection action. " Pending" status is not identified.
Document the case history regarding the facts that lead to the conclusion a request for an agreement does not warrant identification of a pending installment agreement.
Group managers must agree that such requests were made to delay collection action.
Group managers must document case histories that they agree that the request was made to delay collection action.
Regarding IRM 18.104.22.168(3)(e), and IRM 22.214.171.124(5)(a) and (b), in situations where a sale of property is scheduled, even if an installment agreements is considered pending, the sale may continue. No managerial approval is required in this situation (beyond what is necessary to hold the sale.)
Inform taxpayers when their requests for agreement do not result in identification of a pending installment agreement. This may be relayed:
in writing; or
by any other means of communication that is customary or usual between the taxpayer and Service employee;
this contact must be noted in the case history.
Enforcement action, including seizure and sale, may be taken without regard for the requests for installment agreements made to delay collection. Increased levels of approval are required to authorize enforcement actions in cases where the installment agreement requests have been made to delay collection (See IRM 126.96.36.199.9 and Exhibit 5.11.1–1 – Notices of Levy; IRM 5.10 – Seizure and Sale.)
It is important that taxpayers receive the above notification before any levy is issued. If there is doubt about the legality of levy issuance or other enforcement action, consult Counsel.
If any pre-levy requirements have not been satisfied (see IRM 188.8.131.52), Counsel approval must be sought. (Also see note in IRM 184.108.40.206(1))
If the request for an installment agreement occurs during an appeals process, Appeals must be notified that the request for installment agreement is deemed as a request made to delay collection.
If levies are issued on these cases, ensure that they are approved in accordance with IRM Exhibit 5.11.1–1, Delegation of Authority.
In the process of informing taxpayers that agreements have not been identified as pending, revenue officers and other contact employees may negotiate with taxpayers to arrive at an acceptable installment agreement amount or determine that an installment agreement is pending, based on dialogue with taxpayers, additional information or documentation.