5.14.3 Deadlines, Payments, and Requests for Installment Agreements Made to Delay Collection

Manual Transmittal

June 11, 2018

Purpose

(1) This transmits a revision to IRM 5.14.3, Installment Agreements, Deadlines, Payments, and Requests for Installment Agreements Made to Delay Collection.

Material Changes

(1) Section title changed.

(2) IRM 5.14.3.1 was added to establish internal control information, titled Program Scope and Objectives. The following sections have been renumbered.

(3) IRM 5.14.3.2 was updated to clarify examples.

(4) IRM 5.14.3.3 was updated to clarify language.

(5) Citations have been corrected throughout this section.

Effect on Other Documents

This supersedes IRM 5.14.3, dated June 12, 2009.

Audience

SB/SE Collection Employees

Effective Date

(06-11-2018)

Kristen Bailey
Director, Collection Policy
SE:S:C:HQC:CP

Program Scope and Objectives

  1. Purpose. This chapter discusses the installment agreement process relative to setting deadlines and receiving payments, describes situations and actions that would meet the criteria for delaying collection actions, and describes appropriate case actions in situations where taxpayers seek to delay the collection process.

  2. Audience. These procedures and guidance apply to IRS Field Collection Revenue Officers and Group Managers.

  3. Policy Owner. The Director, Collection Policy is the policy owner of this IRM.

  4. Program Owner. Collection Policy, Case Resolution Alternatives (CRA) is the program owner of this IRM.

  5. Primary Stakeholders:

    • Field Collection

    • Independent Administrative Review

    • Insolvency

    • Appeals

    • Taxpayer Advocate Service

  6. Program Goals. While installment agreements can be a viable case resolution for many delinquent accounts, it is important to ensure taxpayers do not improperly delay the collection process through the use of frivolous or less than good faith installment agreement proposals. By following the direction in this IRM section, employees can identify proper procedures for keeping cases moving toward the appropriate resolution.

Background

  1. This chapter will discuss the process and procedures for requesting payments prior to establishing a formal installment agreement, setting deadlines for actions necessary to resolve the taxpayer’s account, identifying situations that would indicate that the taxpayer is attempting to delay collection through installment agreements that do not reflect true ability to pay and directing what actions to take in those situations.

Authority

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

  2. IRC§ 6201(a)(4), Assessment Authority.

  3. Treas. Reg § 301.6343

  4. Public Law 111-237, Firearms Excise Tax Improvement Act of 2010

Responsibilities

  1. The Director, Collection Policy is the executive responsible for the policies and procedures to be employed by collection personnel.

  2. Field Collection Group Managers and Territory Managers are responsible for ensuring the guidance and procedures described in this IRM are complied with.

Program Management and Review

  1. Program Reports:

    1. Monthly Installment Agreement Trend Report. Sourced from the Collection Activity Report (CAR), CRA generates and reviews a monthly Installment Agreement trend report that captures data on the various types of installment agreements and compares year over year data on installment agreement inventory levels, the number of installment agreements initiated, default rates, full pay rates, and dollars collected. Any anomalies are identified and researched for potential causes. Negative trends are identified and causes addressed.

  2. Program Reviews:

    1. CRA will conduct ad hoc Installment Agreement program reviews as necessary to verify compliance with IRM requirements, address TIGTA/GAO findings, and get behind any trends that appear.

    2. Case reviews are conducted by Group Managers to ensure compliance with this IRM.

    3. Group managers are required to approve the determination that an installment agreement request is being made to delay collection action.

    4. Operational reviews are conducted by the Territory Manager and Area Director annually to evaluate program delivery and conformance to administrative and compliance requirements.

Program Controls

  1. Independent Administrative Review (with few exceptions) is required of all rejected installment agreement proposals, and all rejection, default and termination decisions are subject to appeal procedures.

  2. The Integrated Collection System (ICS) ensures that taxpayer conditions meet requirements for Streamlined or In-Business Express installment agreement processing criteria, that there are no unfiled returns, and requires group manager approval for all non-streamlined installment agreements.

  3. The Integrated Data Retrieval System (IDRS) programming requires that all open modules be included in an installment agreement for input to be successful.

Terms

  1. Frequently used terms used in this IRM along with their definition include:

    1. Delinquent Taxes: balance due, ACS balance due accounts and/or notice status accounts;

    2. Accrued Taxes: unassessed amounts due on returns, missed estimated tax payments or undeposited FTDs as of the date of contact;

    3. Current Taxes: FTDs and ES amounts that become due after the date of contact.

Acronyms

  1. This table lists commonly used acronyms and their definitions:

    Acronym Definition
    ACS Automated Collection System
    AC Action Code
    CDP Collection Due Process
    ES Estimated Tax
    FTD Federal Tax Deposit
    GAO U.S. Government Accountability Office
    ICS Integrated Collection System
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    NFTL Notice of Federal Tax Lien
    RO Revenue Officer
    SBSE Small Business Self Employed
    TC Transaction Code
    TIGTA Treasury Inspector General for Tax Administration

Related Resources

  1. IRM Resources:

    • IRM 4.20.4, Examination Collectibility, Installment Agreements

    • IRM 5.19.1.6.4, Installment Agreements

    • IRM 8.20.7.37, Installment Agreements

    • IRM 5.14.1.6, Multi-functional Installment Agreements, contains guidance for other functions.

  2. Web Resources:

    • Centralized Case Processing (CCP): http://mysbse.web.irs.gov/collection/ccpcoll/default.aspx

    • ICS User Guide :http://mysbse.web.irs.gov/collection/collsystems/ics/guides/userguide/default.aspx

    • MY SBSE web: http://mysbse.web.irs.gov/default.aspx

Setting Deadlines and Receiving Payments

  1. 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.

  2. 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:

    1. there is no planned resolution for the case; or

    2. there is a planned resolution, but no payments will result from that planned resolution until a later date; or

    3. 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

    4. the disposition of an asset or assets necessary to reduce the amount of liability subject to agreements will take time; or

    5. there is a necessity to verify financial information received thus far, and documentation or information has been requested from the taxpayer; or

    6. 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

    7. the taxpayer plans to make payments or requests to make payments pending final disposition of the case.

  3. 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.

  4. 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 5.14.3.2(8) on IDRS regarding combining the request for payment with requests for other information or documentation.

  5. 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.

  6. Unlike installment agreement payments, requested or voluntary payments may be designated by taxpayers. Unless designated, there is no particular designated payment code (DPC) for these payments.

  7. 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:

    1. an installment agreement is pending;

    2. the installment agreement must be reviewed and approved by the group manager (if applicable);

    3. installment agreements are not granted until taxpayers receive confirmation in writing by issuance of a letter or a signed copy of Form 433-D, Installment Agreement, or Form 2159, Payroll Deduction Agreement;

    4. acceptance of voluntary or required payment(s) is not to be construed as acceptance of a requested installment agreement;

    5. notification of either acceptance or rejection of an installment agreement request will be provided to the taxpayer. If rejected, the taxpayer will be notified of the decision and their appeal rights prior to any enforcement action; and

    6. no levy action will be taken so long as a payment agreement request is pending.

  8. If payments are requested, this may be in connection with gaining other information, documentation or the request for required returns. See IRM 5.14.1.4.2, Compliance and Installment Agreements. Requests must be made using Form 9297, " Summary of Taxpayer Contact," which may be mailed, hand delivered, or personally given to taxpayers IRM 5.1.10.3.2(9)(a), Effective Initial Contact.

  9. 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.

  10. 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 5.14.11.4, Defaults and Terminations; IDRS Monitoring, and IRM 5.14.11.5, Considerations after Default or Termination, Including Reinstatement, for applicable time periods).

  11. 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 time frames and other actions have been taken). (See also IRM 5.1.9, Collection Appeal Rights, regarding CDP, IRM 5.11, Notice of Levy, regarding levies, IRM 5.8, Offer in Compromise, regarding offers in compromise, and IRM 5.10, Seizure and Sale, regarding seizure and sale.)

  12. 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:

    1. the request for an installment agreement is recommended for rejection;

    2. an independent administrative reviewer agrees rejection should be conveyed to the taxpayer (see IRM 5.14.9.7, Independent Administrative Review after Recommended Rejection of Installment Agreement Requests;

    3. rejection is conveyed to the taxpayer; and,

    4. appropriate appeal time frames (or appeals) have expired (see IRM 5.14.9.7 (13)(d), Independent Administrative Review after Recommended Rejection of Installment Agreement Requests).

    Note:

    Installment agreements are not considered pending if the direction provided in IRM 5.14.3.3 applies.

  13. 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.

    1. 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 5.14.9.7, Independent Administrative Review after Recommended Rejection of Installment Agreement Requests); rejection is conveyed to the taxpayer; and appropriate appeal time frames (or appeals) have expired (see IRM 5.14.9.7, (13)(d)).

    2. After the actions described in IRM 5.14.3.2(13)(a), and if all other appropriate notices, CDP time frames and other actions have been taken, appropriate collection action may be taken.

  14. 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.

    Note:

    If taxpayers fail to make equity-based payments (like the one described in Example B below) rejection may be recommended.

  15. The following examples illustrate some situations where the procedures provided above should be followed:

    1. Example A: On March 21, 2017, Mr. B meets with the revenue officer (RO) regarding tax liabilities totaling $200,000 for two years, and unfiled 1040 tax returns for 2013 and 2014. The RO demands full payment of the tax liabilities and delinquent returns, but Mr. B states that he is unable to pay. Form 433 A, Collection Information Statement for Wage Earners and Self Employed Individuals, 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, Summary of Taxpayer Contact, providing dates by which Mr. B must take the following actions:
      April 15: file tax return or extension with proof of payment for 2016.
      April 22: make payment of $5,000 and file original, signed Form 1040, U.S. Individual Income Tax Return, for tax years ending 2013 and 2014.
      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.

      Note:

      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.

    2. 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 he can make a new request for an installment agreement upon having filed all tax returns, and that he currently does not have a pending IA request.. 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 requested 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 and delinquent returns., . All of the above is documented in the case history.

    3. Example C This example is identical to Example A above except that the taxpayer has no delinquent returns and the taxpayer makes an IA request of $5000 per month. The installment agreement request of $5000 month would meet the pending criteria and a 971/043 would be requested immediately. If the May 21st deadline to liquidate the equity in the property is not met, the RO can recommend the IA for rejection to the IAR. If the IAR concurs with the RO recommendation, the RO can communicate the rejection of the IA proposal and the associated appeal rights to the taxpayer.

      Note:

      No enforcement action can be taken based on missed deadlines for payments and other information while installment agreements are pending or in effect, 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 were 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 may be recommended. (The taxpayer was informed of this.) Collection action can be taken only after independent administrative review and appeals time frames have elapsed.

  16. Information related to "Setting Deadlines and Receiving Payments" are available in:

    • IRM 5.1.9, Collection Appeal Rights, regarding CDP;

    • IRM 5.1.10.3.2, Effective Initial Contact;

    • IRM 5.8, Offers in Compromise; and,

    • IRM 5.10, Seizure and Sale.

Installment Agreement Requests Made to Delay Collection Action

  1. If taxpayers request installment agreements that meet the criteria in this section:

    1. requests will not be recognized;

    2. requests will not be identified as "pending" ;

    3. input of TC 971 AC 043 will not be requested nor completed; and,

    4. 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.

    Note:

    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 5.14.3.3 (8)).

  2. 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 5.14.3.3 (3)(a)); or

    • The request does not address changes requested in response to a prior request; (see IRM 5.14.3.3 (3)(b)); or

    • The request ignores direction provided by revenue officers (see IRM 5.14.3.3 (3)(c)); or

    • The request is made by a taxpayer that has defaulted prior installment agreements; (see IRM 5.14.3.3 (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 5.14.3.3 (3)(e)).

    Note:

    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.)

  3. As provided in IRM 5.14.3.3(1) and IRM 5.14.3.3(2), " pending" status will not be identified if:

    1. 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.

      Note:

      If balance due accounts meet Guaranteed or Streamlined criteria – see IRM 5.14.5, Streamlined, Guaranteed and In–Business Trust Fund Express Installment Agreements , these agreements will be granted.

    2. 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.

    3. 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.

    4. 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.

    5. the request is made at a time that causes it to be classified as a request made to delay enforcement action: See IRM 5.11.1.4.8Pending and Active Installment Agreements regarding levies relative to pending and active installment agreements. See IRM 5.10, Seizure and Sale. See the important note below regarding requests for agreements in the case of sale of property.

      Note:

      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.

      Reminder:

      The taxpayer should be notified that the IRS will not process the installment agreement request.

  4. Examples of situations that do not result in identification of "pending" status:

    1. 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.

    2. 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 5.14.3.3 2(3)(e) and IRM 5.10, Seizure and Sale).

      Note:

      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 5.10.4, Actions Prior to Sale.

    3. 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 5.14.1.4(5), Installment Agreement Acceptance and Rejection Determinations). 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.

  5. 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.

    1. Group managers must agree that such requests were made to delay collection action.

    2. Group managers must document case histories that they agree that the request was made to delay collection action.

    Note:

    Regarding IRM 5.14.3.3(3)(e) and IRM 5.14.3.3(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.)

  6. Inform taxpayers as soon as possible after the solely to delay proposal that their requests for an installment agreement will not result in their case being identified as a pending installment agreement. This may be relayed:

    • in person;

    • telephonically;

    • 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.

  7. 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 5.11.3.5, Notices of Levy; IRM 5.10, Seizure and Sale, and IRM 1.2.44.4, Delegation of Authority for the Collecting Process).

  8. 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.

    Note:

    If any pre-levy requirements have not been satisfied (see IRM 5.11.1.3 (2), Pre-Levy Actions, Counsel approval must be sought. (Also see note in IRM 5.14.3.3 2(1)).

  9. 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.

  10. If levies are issued on these cases, ensure that they are approved in accordance with IRM 1.2.44.4, Delegation of Authority for the Collecting Process.

  11. 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.