Section 2. Partial Payment Installment Agreements and the Collection Statute Expiration Date (CSED)

5.14.2 Partial Payment Installment Agreements and the Collection Statute Expiration Date (CSED)

Manual Transmittal

October 18, 2023

Purpose

(1) This transmits revised IRM 5.14.2, Installment Agreements, Partial Payment Installment Agreements and the Collection Statute Expiration Date (CSED).

Material Changes

(1) Refer to the table below for details on the list of material changes in this IRM.

Effect on Other Documents

Audience

Effective Date

Rocco A. Steco
Acting Director, Collection Policy
Small Business/Self-Employed

Program Scope and Objectives

1. Purpose : This IRM describes the establishment, approval and monitoring of installment agreements when the financial analysis indicates the taxpayer will be unable to satisfy the tax liability within the Collection Statute Expiration Date (CSED). Procedures are also provided for situations in which it may be appropriate to secure a Form 900, Tax Collection Waiver, to extend the statutory period for collection in connection with granting a Partial Payment Installment Agreement (PPIA). Specifically, IRM 5.14.2:

1. Describes the required financial analysis prior to establishing a Partial Payment Installment Agreement (PPIA)
2. Describes the attributes of Asset and No Asset cases
3. Describes situations in which it may be appropriate to extend the Collection Stature Expiration Date (CSED) and the procedures for doing so
4. Describes revenue officer responsibilities for working Campus referrals relative to 2 year reviews of PPIAs

• Field Collection
• Independent Administrative Review
• Insolvency
• Appeals
• Taxpayer Advocate Service
• Centralized Case Processing/Field Office Resource Team

Background

1. All taxpayers are expected to immediately full pay delinquent tax liabilities. When this is not possible taxpayers may be allowed to pay their liabilities over a prescribed period of time. Before a PPIA may be granted, equity in assets must be addressed and, if appropriate, be used to make payment. In some cases taxpayers will be required to use equity in assets to pay liabilities. However, complete utilization of equity is not always required as a condition of a PPIA.
2. If full payment cannot be achieved by the Collection Statute Expiration Date (CSED), and taxpayers have some ability to pay, the IRS can enter into Partial Payment Installment Agreements (PPIAs). The American Jobs Creation Act of 2004 amended IRC 6159 to provide this authority.

Authority

1. IRC 6159, Agreements for Payment of Tax Liability in Installments.
2. IRC 6331(K), Levy and Distraint, No levy while certain offers pending or installment agreements pending or in effect.

Responsibilities

1. The Director, Collection Policy is the executive responsible for the policies and procedures to be employed by collection personnel.
2. The program manager, Case Resolution Alternatives (CRA), is responsible for developing and delivering policies, procedures and practices within the installment agreement program.
3. Field collection group managers and territory managers are responsible for ensuring the guidance and procedures described in this IRM are complied with.
4. Collection employees are responsible for following the guidance provided in the IRM when processing cases.

Program Management and Review

1. Program Reports:

1. Monthly Installment Agreement Trend Report. Sourced from the Collection Activity Report (CAR), Case Resolution Alternatives (CRA) program office generates and reviews a monthly installment agreement trend report that captures data on the various types of installment agreements and compares year-to-year data on installment agreement inventory levels, the number of installment agreements initiated, default rates, full pay rates, and dollars collected.

1. CRA office will conduct ad hoc installment agreement program reviews as necessary to verify compliance with IRM requirements, address TIGTA/GAO findings, and evaluate trends that appear.
2. Case reviews are conducted by group managers to ensure compliance with this IRM.
3. Group managers, leads, and on-the-job instructors (OJIs) utilize the Embedded Quality Review System (EQRS) for evaluating employee performance and providing feedback. The National Quality reviewers use the National Quality Review System (NQRS) to ensure compliance with this IRM and report official organizational business-quality results. The Data Collection Instrument (DCI) is utilized to capture case reviews for both EQRS and NQRS.
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. Determinations that an installment agreement request was made solely to delay collection require managerial approval.
2. Independent Administrative Review (IAR) is required when a proposed rejection occurs. The taxpayer may administratively appeal a termination, modification, or rejection of a proposed IA to the IRS Independent Office of Appeals.
3. The Integrated Collection System (ICS) is a case management system that supports SBSE revenue officers (ROs) in handling delinquent tax cases. In every case, the file must demonstrate that the chosen disposition method is in line with the facts and circumstances outlined in the case, the IRM, and other official guidance. Certain actions taken by ICS users generate systemic approval requests to the manager. All dispositions of Non-Streamlined Installment Agreement (NSIA) cases, including PPIAs, require managerial approval.
4. The Integrated Data Retrieval System (IDRS) is used to monitor most installment agreements for timely payments on accounts, as well as to determine whether taxpayers remain in compliance with filing and paying requirements. IDRS programming also requires that all open balance due modules on IDRS in a notice or collection status are included when an installment agreement is input.
5. Collection group managers are responsible for the quality of work performed by the employees they supervise in accordance with IRM 5.13.1, Collection Quality Measurement, Embedded Quality Collection Field Organizations Administrative Guidelines. Managers are required to follow program management procedures and controls addressed in IRM 1.4.50, Resources Guide for Managers, Collection Group Manager, Territory Manager and Area Director Operational Aid.

Terms

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

1. Delinquent Taxes: balance due (BAL DUE), Automated Collection System (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; and
3. Current Taxes: federal tax deposits (FTDs) and estimated (ES) tax payments that become due after the date of contact.

Acronyms

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

Related Resources

1. IRM Resources:

• IRM 4.20.1.4, Examination Collectibility - Installment Agreements
• IRM 5.19.1.2.6.3, Installment Agreements
• IRM 8.20.7.41, Installment Agreements
• IRM 5.14.1.6, Multi-functional Installment Agreement Authority

• Centralized Field Support Knowledge Base Homepage: https://irsgov.sharepoint.com/sites/ETD-KMT-KB130?e=1%3A80c523e7a7434e10865fd5def82d4124
• ICS User Guide: https://irsgov.sharepoint.com/sites/ETD-KMT-KB123/SitePages/Forms/GrpByChapter.aspx?RootFolder=%2Fsites%2FETD%2DKMT%2DKB123%2FSitePages%2FCollection%20Systems%2FIntegrated%20Collection%20System%20%28ICS%29&FolderCTID=0x01200012CA337F2046A94288AD39407CC1658A
• Installment Agreements Knowledge Base Homepage: https://irsgov.sharepoint.com/sites/ETD-KMT-KB065

Overview

1. All taxpayers are expected to immediately full pay delinquent tax liabilities. When this is not possible, taxpayers may be allowed to pay their liabilities over a prescribed period of time. If full payment cannot be achieved by the Collection Statute Expiration Date (CSED), and taxpayers have some ability to pay, the IRS can enter into Partial Payment Installment Agreements (PPIAs). The American Jobs Creation Act of 2004 amended IRC 6159 to provide this authority.
2. Before a PPIA may be granted, equity in assets must be addressed and, if appropriate, be used to make payment. In some cases, taxpayers will be required to use equity in assets to pay liabilities. However, as discussed below, complete utilization of equity is not always required as a condition of a PPIA. Consider levy or seizure in accordance with IRM 5.10, Seizure and Sale, and IRM 5.11, Notice of Levy if there is significant equity in assets. If enforcement action is appropriate, a PPIA will not be granted. Follow rejection procedures in IRM 5.14.1, Securing Installment Agreements and IRM 5.14.9, Routine and Manually Monitored Installment Agreement Dispositions, Independent Review and Appeals. In cases where PPIAs are granted after consideration of levy or seizure, document the case file as indicated in IRM 5.14.2.2.2 (6).

Note:

Continuous wage levies (CWL) (see IRM 5.11.5.6) should not be used in lieu of a PPIA if the taxpayer is current with filing requirements and has provided the necessary financial information to determine a payment amount unless the taxpayer refuses to sign the Form 433-D, Installment Agreement. Since CWLs are not installment agreements, taxpayers subject to them are not entitled to rights provided by IRC 7122 and CWLs do not provide for a systemic redetermination of collectibility.

Partial Payment Installment Agreement Requirements

1. A full Collection Information Statement is required for all PPIAs. Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals and/or Form 433-B, Collection Information Statement for Businesses, must be completed to determine the taxpayer’s ability to pay (refer to IRM 5.15.1.8, Allowable Expense Overview, for determining allowable expenses.)
2. For all IMF accounts with an Unpaid Balance of Assessment (UBA) less than or equal to ≡ ≡ ≡ ≡ ≡ ≡, compare the current year income information provided by the taxpayer to the income on the last filed return using Command Code (CC) IRPTR and at least one of the following:

1. RTVUE
2. TRDBV
3. Current year tax return

Note:

In addition, compare assets included on the financial statement to the results of information secured via these CCs/Returns. If the current year income has decreased 20% or more from the last filed return income or assets are identified that were not disclosed on the financial statement, discuss and/or resolve any discrepancy with the taxpayer and document the case history. Do not request substantiation if the taxpayer can provide a reasonable explanation.

• Real property records
• Department of Motor Vehicles (DMV)
• Personal property
• FATCA data research refers to the proposed IRM 5.1.18.21, FATCA Research, for procedures to research Form 8938, Statement of Specified Foreign Financial Assets and to request Form 8966, FATCA Report.

• a full credit report is required, and
• AMDIS when there is a -L freeze on the account indicating open examination activity, RAR or SAR if the assessment originated in Examination or CI.

1. Verify income and expenses. Use bank statements to verify both income and expenses;
2. Request documentation if assets, liabilities, expenses or income appear questionable;
3. Conduct thorough record checks to determine ownership and equity in both real and personal property, which includes conducting FATCA research and examining motor vehicles;
4. If appropriate, request to taxpayers that they sell assets or borrow on equity in assets in order to make payment on the delinquent taxes;
5. As noted in IRM 5.14.7.2(1)b, Summary of Agreement Criteria for Business Accounts, ensure that the taxpayer has the ability to pay current taxes as well as operating expenses and pay delinquent taxes.

Note:

ICS will not allow closing a case as an IBTF-IA PPIA (No Asset) with a back up Form 53. If the IA defaults, it must come back out for financial review before it can be placed in CNC status.

Note:

Because the underlying liability will not be fully paid, the TFRP will usually be assessed. The only exception to this requirement is in circumstances in which there is no collection potential from the responsible officers.

Asset Equity and Partial Payment Installment Agreements

1. No Asset/No Equity Cases: A PPIA may be granted if a taxpayer has no assets or equity in assets; or has liquidated available assets to make a partial tax payment.
2. Asset Cases: A PPIA may be granted if a taxpayer does not sell or cannot borrow against assets with equity because:

1. the assets have minimal equity or the equity is insufficient to allow a creditor to loan funds;

Example:

Example:

the property is held as a tenancy by the entirety in a state that does not allow only one spouse to encumber such property, when only one spouse owes the tax and the non-liable spouse declines to go along with the attempt to borrow, and the property does not appear to have been transferred into the tenancy to avoid the tax collection.

Example:

the business taxpayer owns a vacant lot in a high-value area, but the lot cannot be sold until it meets certain environmental regulations.

Example:

the taxpayer is on a fixed income, such as social security, and has the ability to make small monthly payments. The only other asset is the taxpayer’s primary residence and there is equity in the property. The revenue officer does a risk analysis and determines that seizing the property would cause an economic hardship because the taxpayer cannot find suitable replacement housing and meet necessary living expenses if the property would be seized.

Note:

See IRM 5.15.1.11, Other Expenses for additional information regarding necessary expenses.

Waiver Procedures for Partial Payment Installment Agreements

1. Consider securing a waiver with a PPIA where there is an asset that will come into the possession of a taxpayer after the CSED and liquidation of that asset offers the best case resolution (in lieu of liquidating existing assets to partially pay the liability).

Note:

Do not include any Affordable Care Act individual shared responsibility payment liabilities (MFT 35 and Mirrored MFT 65) on the waiver.

Example:

The taxpayer owes individual income tax and is the beneficiary of a trust. The taxpayer will receive a monthly distribution from the trust that would be used to fund the PPIA. The taxpayer will not be entitled to the principal of the trust for two more years. The CSED will expire in one year. The only other asset is the taxpayer’s primary residence. The equity in the property is less than the net value of the trust but is available for immediate collection action. The taxpayer has been unable to secure a loan against the equity of the property due to numerous factors such as limited income and poor credit. The risk analysis was completed by the revenue officer and the taxpayer offered to extend the statute and to liquidate the trust in two years. The waiver was secured for two additional years.

Example:

A corporate taxpayer cannot pay its payroll tax liability within the CSED. It can make partial payments for the remaining CSED period. The corporation is current with its federal tax deposits. The corporation has an interest in undeveloped real estate which is under development and will be completed in two years. Once the land is developed it will increase significantly in value and will be immediately sold. The CSED will expire in one year. Seizing and selling the assets of the business which would include the vacant land and construction equipment would not significantly reduce the liability and would impact the business’s ability to complete the development of the property. The corporate officers offer to extend the statute to provide the opportunity to complete the development and pay the taxes along with other business debts. The trust fund recovery penalty will be addressed per IRM procedures.

Example:

The taxpayer cannot pay the liability within the CSED but can make monthly payments. The statute will expire in twelve months. The taxpayer has no distrainable assets. The taxpayer owes $1,800 and can pay $100 per month. Secure a PPIA for twelve months and no waiver is required. The statute would be allowed to expire.

Example:

The individual taxpayer cannot pay the liability within the CSED but can make monthly payments. The statute will expire in three years. The taxpayer owns real property with minimal equity and they cannot borrow against the equity. The taxpayer owes $10,000 and can pay $200 per month. Secure a PPIA for three years and no waiver is required. There will be a two year financial review conducted. If there is no significant change in ability to pay, the payment amount will remain unchanged until the statute expires. A waiver could not be secured during the two year financial review process unless the taxpayer’s financial condition has improved, the agreement is terminated, and a new one is granted.

Example:

The taxpayer is likely to have a significant change in their ability to pay based on a foreseeable event, but the taxpayer refuses to sign a waiver. Secure a PPIA and note the case history with respect to the likely improvement in financial condition. This issue will be considered during the 2 year financial review.

Note:

Do not secure waivers on installment agreements except on PPIAs as stated in IRM 5.14.2.1.3 , Responsibilities.

1. Selecting the module to be updated; then
2. Select , , and ; and then
3. Update the CSED date, and
4. Select the appropriate definer code from the drop down list. For FS 2 (married filing joint) modules, selection of Definer Code 01 (Form 900), will generate a prompt to input "Waiver Signed Date" and "Waiver Secured for" information (Primary, Secondary or Both). Update as appropriate.
5. Click "Save" to save your information.