PARTIAL PAYMENT INSTALLMENT AGREEMENTS

 

Part 5. Collecting Process

Chapter 14. Installment Agreements
Section 2. Partial Payment Installment Agreements and the Collection Statute Expiration Date (CSED)

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5.14.2 Partial Payment Installment Agreements and the Collection Statute Expiration Date (CSED)
5.14.2.1 Partial Payment Installment Agreements
5.14.2.2 Collection Statute Expiration Date (CSED): Law, Policy and Procedures.
Exhibit 5.14.2-1 CSED Extension and Suspension Example

5.14.2.1 (09-26-2008)
Partial Payment Installment Agreements
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 Service can enter into Partial Payment Installment Agreements (PPIAs). The American Jobs Creation Act of 2004 amended IRC § 6159 to provide this authority.

Before a PPIA may be granted, equity in assets must be addressed and, if appropriate, be used to make payment. In most 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 and 5.11.1.1.2 if there is significant equity in assets. If enforcement action is appropriate, a PPIA will not be granted. Follow rejection procedures in IRM 5.14.1.3 and 5.14.9.3. In cases where PPIAs are granted after consideration of seizure, document the case file as indicated in IRM 5.14.2.1.2(6).

5.14.2.1.1 (09-26-2008)
Partial Payment Installment Agreement Requirements
A full Collection Information Statement is required for all PPIAs. Forms 433A or 433B must be completed to determine the taxpayer’s ability to pay (refer to IRM 5.15.1.7 to determine allowable expenses)

For all IMF accounts less than or equal to the amount in LEM 5.14.2.1.1(2) the following minimum verification is also required: CFOL, IRP & RTVUE

For IMF accounts above the amount in LEM 5.14.2.1.1(3), or if there is significant equity that cannot be liquidated, the following minimum verification is required: Real property records, DMV, personal property, full credit report, AMDIS when there is open examination activity, RAR or SAR if the assessment originated in Examination or CI.

Conditional expenses are not allowed for PPIAs. Only necessary expenses are permitted.

For in-business trust fund accounts use the guidelines in IRM 5.14.7.3.1(7), (IBTFIA guidelines), which state that at a minimum you should:

Verify income and expenses. Use bank statements to verify both income and expenses;

Request documentation if assets, liabilities, expense or income appear questionable;

Complete record checks to determine ownership and equity in real and personal property, including motor vehicles;

If appropriate, request that taxpayers sell assets or borrow on equity in assets in order to make payment on the delinquent taxes;

As noted in IRM 5.14.7.1(4)(b), ensure that the taxpayer has the ability to pay current operating expenses as well as current taxes.

For out-of-business trust fund accounts use the guidelines in IRM 5.14.7.3.1.1(15).

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

The taxpayer must agree to pay the maximum monthly payment based upon the taxpayer’s ability to pay.

File or ensure that a Notice of Federal Tax Lien (NFTL) was previously filed on all aggregate liabilities greater than the amount in LEM 5.14.2.1.1(8). Follow NFTL procedures in IRM 5.12.2.4.1 unless it meets criteria in IRM 5.12.2.4.2.

The Campus will refer cases for revenue officer assignment in some situations. See IRM 5.14.2.1.10.

5.14.2.1.2 (09-26-2008)
Asset Equity and Partial Payment Installment Agreements
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.

Asset Cases: A PPIA may be granted if a taxpayer does not sell or cannot borrow against assets with equity because:

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

Example:
some lenders require equity of greater than 20% of property value in order to grant the loan.

the taxpayer is unable to utilize equity;

Example:
the property is held as a tenancy by the entirety 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.

the asset has some value but the taxpayer is unable to sell the asset because it is currently unmarketable;

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

the asset is necessary to generate income for the PPIA and the government will receive more from the future income generated by the asset than from the sale of the asset;

it would impose an economic hardship on the taxpayer to sell property, borrow on equity in property, or use a liquid asset to pay the taxes. Economic hardship is defined in 26 C>F>R 301.6343-1 as not meeting reasonable basic living expenses.

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.

The taxpayer’s loan payment would exceed the taxpayer’s disposable income and they would not qualify for a loan.

The taxpayer will normally be required to make a good faith attempt to utilize equity before the Service will approve a PPIA. This includes applying normal business standards when applying for loans using equity as collateral. Taxpayers will also be required to submit copies of all documents that are used in the loan application process.

If the taxpayer does not comply with the requirement of making a good faith attempt to use equity in assets or is not willing to make monthly payments consistent with ability to pay, the taxpayer will be considered a "won’t pay" and seizure/levy action may be appropriate. If enforcement action is appropriate, a PPIA will not be granted. If the taxpayer is in pending IA status, follow rejection procedures in sections 5.14.1.3 and 5.14.9.3. The case history should be documented with a statement as to why the PPIA was not granted.

If the taxpayer is unable to secure a loan or liquidate an asset following a good faith attempt to do so, the revenue officer will need to make a seizure/levy determination (See IRM 5.10.1.3).

If it has been determined that enforcement action is not appropriate, a PPIA can be granted. The case history should be documented as follows: "Seizure (or levy) of (name of asset) has been considered, but it is not the appropriate resolution because (provide reason)" .

5.14.2.1.3 (09-26-2008)
Waiver Procedures for Partial Payment Installment Agreements
Do not secure Collection Statute Expiration Date (CSED) waivers on non-PPIA agreements. Generally, do not secure waivers on PPIAs; however, consider securing waivers with PPIAs in the following situations:

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).

Example:
The taxpayer owes individual income tax and is the beneficiary to 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 corporation 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. The land once developed would 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.

A waiver is no longer required to be secured when the taxpayer’s only ability to satisfy the tax liability after the CSED expiration is through a continuation of the installment agreement and there is no significant change in ability to pay as identified through the two year financial review process.

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.

 

The waiver can only be secured at the inception of the PPIA and not during the two year review process, unless a new PPIA is executed at that time. The length of the extension must be based on the time that it will take to make payments and cannot exceed five years plus one year to provide for other administrative actions.

Note:
Do not secure waivers on installment agreements except on PPIAs as stated in IRM 5.14.2.1.3.

When a Form 900 waiver is secured, the CSED must be updated on ICS for all periods that are extended by the waiver by:

Selecting the module to be updated and pressing <Enter>; then

selecting <F5 DETAIL>,

selecting <B. UPDATE MODULE DATE>,

selecting <A. NEW IDRS CSED DATE (TC 550)>, and

updating the CSED date, and selecting the appropriate definer code from the drop down list.

Note:
See IRM 5.14.9.5(10) for waiver processing instructions.

5.14.2.1.4 (09-26-2008)
Preparing Partial Payment Installment Agreements for Approval and Processing
Ensure the taxpayer is in compliance with filing, withholding, federal tax deposit and estimated tax payment requirements (see IRM 5.14.1.4.1).

Document ICS with the justification for the PPIA as the best case resolution.

Include all balance due accounts including pre-assessed modules.

Use installment agreement closing option A or B on ICS.

Agreement Locator Numbers (ALNs) are four digit codes (XXYY) that indicate specific types of processing will occur at the Campus level. ICS selects the proper ALN for PPIAs.

For PPIAs granted to taxpayers who accounts are not on ICS, choose the proper ALN for PPIAs as follows:

use ALN "12" in the "YY" position of the ALN;

generally use "02" in the "XX" position unless one of the conditions in IRM 5.14.1-2 or in the chart below, are present;

generally use "12" in the "XX" position of the ALN for multiple condition PPIAs (see table below for exceptions, including for Direct Debit and Payroll Deduction Agreements.)

Type of PPIA ALN Required IDRS History Entry
PPIA with no other conditions 0212 None
PPIA with pre-assessed module 1212
Note:
Write note to tax examiner technician: "Turn the Assessment Indicator to ON."
UM30200412 (for MFT 30 tax year 200412)
Direct Debit PPIA 0312
Caution:
If other conditions exist, do not use ALN 1212. "03" must be used in the "XX" position for Direct Debit IAs. If other conditions exist, write a note to the tax examiner technician and request input of other conditions (i.e. pre-assessed, backup 53, etc.) be input as IDRS history entries.
DIRECT DEBIT
Payroll Deduction PPIA 1112
Caution:
If other conditions exist, do not use ALN 1212. "11" must be used in the "XX" position for Direct Debit IAs. If other conditions exist, write a note to the tax examiner technician and request input of other conditions (i.e. pre-assessed, backup 53, etc.) be input as IDRS history entries.
PDIA
Report Currently Not Collectible if PPIA defaults 1212
Note:
CNC on default is usually indicated by "53" in the "YY" position of the ALN. Since PPIAs require use of "12" in the "YY" position, write a note to the tax examiner technician requesting they ensure that "PPIA/CNCXX (XX = the TC530 action code for TPI reactivation" is input as an IDRS history item.

Caution:
If other conditions exist, write a note to the tax examiner technician and request their input as IDRS history entries.
PPIA/CNCXX (XX = the TC530 action code for TPI reactivation

For PPIAs not granted on ICS use as many IDRS history entries as necessary on multiple condition PPIAs.

Example:
For PPIAs that are direct debit and will be reported uncollectible on default, use ALN 0312 and IDRS history entries: "DIRECT DEBIT, CNC ON DEFAULT" .

Review Suppress Indicators (RSI) instruct Campuses to reissue installments agreements under certain conditions after the two year review. ICS selects the proper RSI for PPIAs granted using ICS, however for PPIAs granted to taxpayers whose accounts are not on ICS, use RSI "5" , and choose a review cycle two years in the future.

Example:
If the current date is February 14, 2005, choose the review cycle that contains that date in the year 2007 (200707).

Mark the top of the Installment Agreement Form, Form 433D, in red as "PPIA" .

Process PPIAs immediately after approval and forward the case file to Centralized Case Processing.

5.14.2.1.5 (09-26-2008)
Group Manager Approval of Partial Payment Installment Agreements
All PPIAs require managerial approval. The group manager must review these cases to ensure that they reflect the following documentation:

thorough analysis of financial statement(s)

consideration of other available means of collection

the rationale for allowing the taxpayer to retain assets with equity

If a manager does not believe that the PPIA is the appropriate resolution follow the procedures in IRM 5.14.9.3. The case history should be documented with a statement as to why the PPIA was not granted.

5.14.2.1.6 (09-26-2008)
Monitoring and Review of Partial Payment Installment Agreements by Centralized Case Processing
IRC § 6159 requires that PPIA's be reviewed every two years. Centralized Case Processing will monitor PPIA’s and conduct the two year review.

PPIA's will be systemically monitored in collection status 60 to ensure that:

payments will be directed to Campuses,

monthly reminder notices are sent to taxpayers (CP 521)

the two year financial review will be conducted (CP 522)

In situations where taxpayers respond to the notice for more financial information, CP522, Centralized Case Processing will review new financial information.

Centralized Case Processing when conducting the two year review, must consider the taxpayer’s income and expenses as well as assets and equity to determine if:

the balance can be fully paid; or

adjustment to the payment amount is necessary; or

agreements should continue without change.

If there are increases to either the taxpayer’s income or equity in assets, and the taxpayer now has the ability to full pay, demand will be made for full payment.

If the taxpayer has newly acquired assets or increased equity in assets which can be applied to the liability in part, the taxpayer will be required to utilize the equity before a new PPIA will be allowed on the remaining liability.

If the financial review indicates the taxpayer’s ability to pay an amount that is different from the existing agreement and the payment amount needs to be increased, these changes will be proposed to the taxpayer:

verbally, on the phone; or

with the letter provided in IRM Exhibit 5.14.4 – 1 or other Campus approved correspondence.

If there is no significant change to the taxpayer’s financial situation, the agreement will continue. The taxpayer will be notified that there is no change in the agreement.

If Centralized Case Processing is unable to revise the agreement, terminate, re-input or take other actions necessary to resolve cases, the agreement will be forwarded as follows:

ACS (0012) cases will be returned to ACS

Campus (0112) cases will be issued to ACS

Field (0212) no equity cases will be forwarded to ACS

Field Asset cases will be forwarded to the field

If it is determined that field action is necessary, courtesy investigations will be generated and sent for assignment to field revenue officers.

5.14.2.1.7 (09-26-2008)
Partial Payment Installment Agreement Default and Termination Procedures (for Campus and Case Processing)
Only PPIAs that originated in the field as asset cases may be returned to the field.

Because PPIAs are monitored in status 60, they will be defaulted if taxpayers do not make payments, or if new accounts are assessed. Campus functions send CP 523 to taxpayers when agreements default for these two reasons.

Centralized Case Processing also monitors the status of certain PPIAs (MMIA and IBTF-IA). If there is an IDRS default of an MMIA or IBTF PPIA, Centralized Case Processing employees should verify CP 523 notice was sent by the Campus.

If CP 523 notice was not sent, input command code IADFL. This will cause:

the account to update to status 64; and

issuance of the default notice CP 523.

Note:
See IRM 5.14.11.4, which explains the notice and actions that can be taken.

If payment was received from the taxpayer, note the case history and verify the case was reinstated to status 60.

If, after receipt of payment, the case was not reinstated to status 60, verify there is no other reason for the default condition, then request reinstatement of status 60.

If payment was not received, attempt to contact the taxpayer and request payment. If no payment is received within 45 days from the date of CP 523 and the agreement has not been reinstated or a new agreement reached, the agreement will be automatically terminated on the 46th day:

Letter 1058(DO), may be issued if it has not been issued previously. (See IRM 5.14.11.6 and IRM 5.11.1.2.2.2(4) regarding issuance of Letter 1058(DO).) or

if Letter 1058 has previously been issued and 180 days have passed, Letter 3174P should be used. (See IRM Exhibit 5.11.1-3.)

If taxpayers do not respond within 90 days from issuance of notice CP 523, follow the procedures provided in IRM 5.14.11.6 (4).

After input of the TC 971 AC 163, transfer the case to the appropriate field group pursuant to zip code and grade level using the ICS parameter tables. (See IRM 5.14.11.5(7)(b).)

If an Other Investigation (OI) is currently assigned to a field employee, transfer the case to that employee.

Ensure the ICS case history is documented with the actions taken, including a record of responses received from taxpayers and third parties.

If the taxpayer did respond to the default notice follow the procedures IRM 5.14.11.7, IRM 5.14.11.8, and IRM 5.14.11.9.

If not resolved pursuant to the procedures listed in IRM 5.14.11.5(8), cases should be transferred to appropriate collection field groups pursuant to zip code and grade level using ICS parameter tables. If there is currently an OI assigned to Collection, transfer the case to that employee. (See IRM 5.14.7.5 regarding OIs and IRM 5.14.8.4 regarding monitoring.)

If Appeals is conducting an investigation and or hearing on an unrelated issue, the case should be held in Centralized Case Processing until Appeals makes a determination. (See IRM 5.14.11.5(16)(e) regarding appeals of installment agreement terminations.)

If assistance is needed from the collection field group prior to the case being transferred to the field, an OI may be sent to the collection field function to perform specific requests.

If Appeals determines an installment agreement is not the proper case resolution, or if the resolution cannot be completed within Centralized Case Processing, forward the case to the appropriate collection field group pursuant to the zip code and grade level of the case listed in the parameter tables located in ICS. If there is currently an OI assigned to field Collection, transfer the case to the proper employee.

Before transferring it to collection field function, the Case Processing employee should ensure that 30 days have passed since termination of the installment agreement and the case is ready to proceed with collection action. The employee should also ensure that all actions taken are documented in the case history and TC 971 AC 163 is input on appropriate modules.

Before sending cases back to collection field function, the direction in IRM 5.14.11.5(10)(b) should be followed.

The procedures provided in IRM 5.14.11.5(13) through (16) should be followed for agreements defaulted because taxpayers fail to make required federal tax deposits or fail to file Form 941 returns at the time such returns are due, after contact by the case processing employees.

Verify federal tax deposits were required. This may be verified by

taxpayer contact, or

summons of bank records, or

Other Investigation to the collection field function to verify.

If the taxpayers file the required Form 941 returns or make delinquent federal tax deposits, leave the agreement in status 60 and monitor as before.

If it is verified that taxpayers are no longer required to file form 941 returns or make federal tax deposits, notate cases accordingly and continue monitoring.

If taxpayers do not file required Form 941 returns or make delinquent federal tax deposits, and it was verified such returns or deposits were required, then:

on the first day after the due date of the return, follow the 6020(b) procedures provided in IRM 5.1.11.6 including completion of Letter 1085 or 1616.

mail Letter 1085 or 1616 along with Letter 2975 proposing termination of the installment agreement.

Note:
Termination based upon a proposed assessment may only be employed in the case of tax returns prepared under IRC 6020(b).

if the taxpayer has not responded after the 30 day period provided in Letter 1085 or 1616 (plus 15 days for mail time), check IDRS to ensure taxpayers have not filed the returns. If returns have not been filed, immediately process proposed returns in accordance with IRM 5.1.11.6.

Note:
Prompt assessment of returns should be considered if enforcement action is being considered and the liabilities for returns are to be included on levies.

If the taxpayer has not made the required deposits, or fully paid the amount due on the return proposed (or assessed) under IRC 6020(b) after the default period (30 days from Letter 2975 plus 15 days for mailing), then the agreement is considered terminated.

Note:
Letter 1058 can be sent if not sent previously. See IRM 5.14.11.5(6).

(See IRM 5.14.11.5(10) regarding Appeals involvement on cases in which appeals regarding other issues are ongoing.) Taxpayers may appeal proposed terminations (defaults) of agreements. The appeal period is 30 days, plus 15 days for mail time from the date Letter 2975/CP 523 was sent. Taxpayers may appeal terminations of agreements. The appeal period is 30 days plus 15 days for mail time from the date of termination. (see IRM 5.14.11.5(11))

Timely appeals must be resolved prior to levy action on balance due accounts included in terminated installment agreements. This requirement also applies to "Partial Payment Installment Agreements" - IRM 5.14.2.1), and accounts for which appeals have been initiated, but not resolved (see IRM 5.14.1.5.)

No levy may be made, or proceeding in court begun, until 30 days after the installment agreement is terminated.

5.14.2.1.8 (09-26-2008)
Partial Payment Installment Agreements (PPIA) with Payroll Deduction Installment Agreements (PDIA) and Direct Debit Installment Agreements (DDIA)
Strongly encourage taxpayers to agree to either payroll deduction or direct debit installment agreements. If this is not possible, a PPIA may still be granted. The reason that a payroll deduction or direct debit agreement could not be secured must be documented in the case history.

5.14.2.1.9 (09-26-2008)
Statute Expirations on Partial Payment Installment Agreements
Upon expiration of the last module statute, the campus will notify taxpayers that payments should no longer be sent. See IRM 5.19.1

The campus will also be responsible for ending direct debit and payroll deduction agreements when the last CSED expires.

5.14.2.1.10 (09-26-2008)
Referrals from Campus
If taxpayers have assets and request PPIAs from campus functions (including ACS) and meet the equity thresholds provided below, cases will be transferred for revenue officer assignment. (See IRM 5.19 for Campus procedures.).

Note:
Campus employees will request that assets be liquidated; cases will only be transferred after taxpayers do not borrow upon or sell assets after requests by campus employees.

These referrals from campus will be subcoded on ICS depending on where the case originated:

ICS Sub code 904: POTENTIAL SIGNIF EQTY – FRM CAMPUS

ICS Sub code 903: POTENTIAL SIGNIF EQTY – FRM ACS

Significant Equity Thresholds Used By Campus for Transfers to Revenue Officers:

For property values up to the amount in LEM 5.14.2.1.10(3) and equity of at least the amount in LEM 5.14.2.1.10(3) ; or

For property values of the amount in LEM 5.14.2.1.10(3) or greater and equity of at least the amount in LEM 5.14.2.1.10(3) ; and, at least 30% of the value of the property.

5.14.2.2 (09-26-2008)
Collection Statute Expiration Date (CSED): Law, Policy and Procedures.

The American Jobs Creation Act of 2004 amended Internal Revenue Code (IRC) section 6159 to provide the authority for the Service to enter into partial payment installment agreements (i.e. installment agreements that do not provide for full payment of the liabilities.) If full payment cannot be achieved by the Collection Statute Expiration Date (CSED), and taxpayers have some ability to pay, the Service can grant Partial Payment Installment Agreements (PPIAs). IRC 6502(a)(2)(A) provides that statutory periods for collection may be extended in connection with granting installment agreements. It is the policy of the Internal Revenue Service that CSED extensions are permitted only in conjunction with PPIAs and only in certain situations (See IRM 5.14.2.1.3). It is the policy of the Internal Revenue Service that CSED extensions are limited to five (5) years beyond the original CSED for each tax account (plus up to one year – see IRM 5.14.2.2(7).) Group Managers will approve CSED extensions – see IRM 5.14.2.2(18). The CSED may be extended more than once for each balance due account as specified in IRM 5.14.2.2(6).

Be aware of the CSED when granting installment agreements. Use IDRS CC ICOMP to verify that the agreement will fully pay all liabilities prior to the CSED and include a copy with the case file (the "Decision IA" application that is available on the SERP website is also acceptable). If the projected date for full payment is prior to the CSED the agreement may be approved. If the projected date for full payment is not prior to the CSED a Partial Payment Installment Agreement may be considered (See IRM 5.14.2.1).

The Internal Revenue Service limits the length of installment agreements to the 10-year statutory collection period except in connection with PPIAs.

IRC 6502(a)(2)(A) provides that statutory periods for collection may be extended in connection with the granting of an installment agreement. It is the policy of the Internal Revenue Service that CSED extensions are permitted only in conjunction with Partial Payment Installment Agreements in certain situations (See IRM 5.14.2.1.3).

Until its revision on December 21, 2000, Internal Revenue Code (IRC) 6331(k)(3) by reference to IRC 6331(i)(5) provided for suspension of the statutory period for collection for tax periods in installment agreements. Despite this statutory suspension, the Service, by policy, limited the length of installment agreements to the 10–year statutory collection period except when CSED waivers were secured.

On December 21, 2000, the Community Renewal Tax Relief Act of 2000 revised the Internal Revenue Code such that the statute of limitations for collection is no longer suspended during installment agreements.

Do not secure Collection Statute Expiration Date (CSED) waivers on non-PPIA agreements. Generally, do not secure waivers on PPIAs; however, a form 900 waiver may be secured only in connection with partial payment installment agreements that extend beyond the CSED in certain situations (See IRM 5.14.2.1.3).

CSEDs may not be extended during installment agreements. CSEDs may be extended only in connection with new PPIAs after mailing CP 523 or Letter 2975, during the default period, or after agreements are terminated. CSED waivers may be secured for any or all of the balance due accounts:

included in the original agreement; and

not included in the original agreement.

(See IRM 5.14.2.2(16); Exhibit 5.14.11-1, and IRM 5.14.9.2(7) regarding the manner in which a "new" agreement can include the balances due in an "old" agreement; and IRM 5.14.11.7(4) regarding defaults, terminations and CSED extensions.)

The period for collection may be extended more than once per tax period in connection with a PPIA if the total of the extensions is not longer than 5 years from the original CSED, plus the periods described in IRM 5.14.2.2(7) through (9).

Note:
Approve CSED waivers in connection with new PPIAs only.

Extensions of the statutory period for collection are limited to no more than five years, plus up to one year to account for changes in the agreement. (See IRM 5.14.2.2(9).)

Prior suspensions of CSEDs due to offers in compromise or legal proceedings do not:

bar extensions of CSEDs with PPIAs,

change the length of extensions beyond the limits provided in this section.

Therefore, CSED suspensions may result in longer periods for collection than provided otherwise by this section (as illustrated in Exhibit 5.14.2–1.) Reasons for CSED suspension include, but are not limited to:

Bankruptcy

Collection Due Process Appeals

Litigation

Offer in Compromise

See 26 USC 6503 for other examples

Requests for joint and several liability relief under IRC Section 6015

Example:
Bankruptcy results in suspension of the CSED on a balance due account. After the bankruptcy, the CSED may be extended five years, plus the period described in IRM 5.14.2.2(9), if there is a partial payment installment agreement.

All tax modules must be included in extension calculations on CC ICOMP. (See IRM 5.14.2.2(12) regarding ICOMP calculations.) Extensions will be calculated from the latest CSED balance due account modules, but the waiver extends the CSED for all assessments on the tax module. If there is more than one assessment on tax modules, and part of the balance due is from the earlier assessment(s) list these assessment dates on the waiver, along with the latest assessment date.

Note:
This may result in extensions longer than six years for parts of some balance due tax modules.

All tax modules may be combined on one Form 900. Ensure it is clear which tax periods and assessment dates correspond to which CSEDs on the form.

Form 900 Waiver will only be executed in connection with PPIAs. (See IRM 5.14.2.1 for additional information.) Use IDRS CC ICOMP to determine payment schedules, and share the results of ICOMPs with the taxpayers. Provide taxpayers with information regarding the manner in which penalty and interest are computed.

Using CC ICOMP, two methods – described in (a) and (b) immediately below – may be used for determining the length of CSED extensions. Method (a) provides for computation of separate CSEDs for each module. Method (b) provides for extending CSEDs to one date for all modules. For both methods:

Include all tax modules in the computation;

Compute the extension separately for each module;

Begin the computation using the module with the earliest CSED; and,

Add additional modules to the computation until all are included.

Method (A) – Extend CSEDs on all modules to separate dates (for each module) up to one year past the latest CSED on the module, ensuring no CSED extension is longer than five years (plus one year as specified in IRM 5.14.2.2(6).)

Method (B): Extend CSEDs to the same date for all modules, ensuring no CSED extension is longer than five years, plus one year.

CC ICOMP does not work on MFT 55, NMF, Status 72, or accounts on which maximum failure to pay penalty has been assessed. For these types of accounts the Decision IA tool may be used. The Decision IA tool can be found on the SERP website at: http://serp.enterprise.irs.gov/databases/irm-sup.dr/e-acsg2.dr/index.html.

Form 900 waivers may be requested only with regard to certain PPIAs (See IRM 5.14.2.1.3 for examples where a waiver would be considered).

Notify taxpayers they have the right to refuse to sign a waiver.

If an installment agreement request is being considered and a taxpayer refuses to sign a waiver, inform the taxpayer the request will be considered and recommended for rejection, then refer the case to the independent administrative reviewer.

Unless some other factor allows for acceptance of agreements, independent reviewers should concur with these rejection decisions.

Taxpayers whose agreements were previously terminated, with all appeal timeframes exhausted regarding the termination, (see IRM 5.14.11.4) may be granted new installment agreements (not reinstatements). CSED waivers may only be secured along with new partial payment installment agreements and only in certain situations (See IRM 5.14.2.1.3), even if there were prior extensions of CSEDs.

If installment agreements are in default (but 90 days have not passed since issuance of CP 523/Letter 2975– see IRM 5.14.11.4 and Exhibit 5.14.11–1 below) reinstatements may include new periods. (See IRM 5.14.2.2(4) regarding securing waivers with new agreements.)

Partial payment installment agreements that extend beyond the original CSED require group manager approval. Servicewide Delegation Order 42 delegates authority to execute Form 900 waivers to Compliance Area Directors. SB/SE Delegation Order 145.19 re-delegates this authority — to execute waivers — to revenue officers. In addition, Servicewide Delegation Order 42 provides authority to approve Form 900 Waivers. Effective immediately, the authority to approve Form 900 (Collection Waivers) associated with Installment Agreements is delegated to Revenue Officer Group Managers, Case Processing Managers and Technical Services Managers. The approval authority reflected in Del Order 42 will be revised to reflect this change.

Caution:
Approving officials must ensure the procedures in this IRM 5.14.2.2 are followed with regard to approval and processing of Form 900 waivers.

Revenue Officers will:

complete Form 900 Tax Collection Waiver, including printing the Area Director’s name on the line titled "Area Director’s name" ;

print the group manager’s name and title in the "By Delegated Representative" block (leaving room for manager’s signature);

submit the Form 900 and agreement together for Group Manager approval.

Group Managers, Case Processing Managers or Technical Services Managers will:

ensure extension computations are accurate when reviewing Forms 900 for approval;

indicate approval of Form 900 by signing in the "By Delegated Representative" block;

approve Forms 900 and related installment agreements on the same date.

When the Form 900 is approved, update the IDRS CSED date on ICS using the "Update Module Date" section and the TC 550 is uploaded to IDRS.

5.14.2.2.1 (09-26-2008)
Additional CSED Information: Centralized Case Processing
Forms 900 will accompany partial payment installment agreements sent to CCP. After receipt of an extended CSED, Case Processing managers must review inputs to ensure:

extension dates are the same on Forms 900 and IDRS; and

status 60 was also input (or Centralized Case Processing is monitoring agreements.)

Note:
These reviews may be delegated to employees

 

After review, Forms 900 and accompanying partial payment installment agreements will be kept in accessible files in Centralized Case Processing for three years beyond dates to which CSEDs were extended. Waivers must be accessible for research and accountability. (IRC 6511(a) provides the right to make claims for refund within 2 years from when taxes are paid). (See IRM 5.14.2.2.1(4) for an exception to the storage location.)

Maintain Waivers in Centralized Case Processing.

5.14.2.2.2 (09-26-2008)
Additional CSED Information: Case Transfers To and From Appeals
Regardless of the time remaining on CSEDs, timely appeals of installment agreement rejections, terminations, and proposed terminations must be referred to Appeals. When referring balance due accounts with CSEDs that expire within 120 days, notify Appeals of the imminent CSED(s). Cases will not be considered transferred to Appeals unless confirmation of transfer is received, and documented, by the referring function.

Appeals will attempt to resolve all issues prior to CSED expiration. If Appeals returns balance due accounts with CSED(s) that expire within 120 days (to referring functions) it will notify the function(s) of the imminent CSED(s). Cases will not be considered transferred to other functions (by Appeals) unless confirmation of transfer is received and documented by Appeals. (See IRM 5.14.9.4 for additional Appeals information.)

5.14.2.2.3 (09-26-2008)
CSED Expiration Legal References: 1.) 90 Day Rule for Installment Agreement CSED Extensions; 2.) Non-Installment Agreement CSEDs
CSED extensions based on waivers secured with installment agreements actually expire 90 days after the expiration of any period for collection agreed upon in writing by the Secretary and the taxpayer at the time the installment agreement was entered into. [See Internal Revenue Code (IRC) 6502(a)(2)(A) and Treas. Reg. § 301.6502-1(b)(1).] These waivers remain in effect regardless of:

whether agreements fully pay taxes, and

lengths of extensions.

For CSED extensions/waivers not secured with installment agreements, the statutory period for collection will expire December 31, 2002, or at the end of the original ten year statutory period for collection if after December 31, 2002. [See IRC 6502(a)(2), and proposed Treas. Reg. ss 301.6502-1(c)].

Exhibit 5.14.2-1 (07-12-2005)
CSED Extension and Suspension Example
EXAMPLE OF EXTENSION AND SUSPENSION OF COLLECTION STATUTE
Date Tax Assessed: 05-10-2000
Original Collection Statute Expiration Date (CSED): 05-10-2010
CSED suspension and (resulting extension) based on bankruptcy: 3 years (1-5-2001 to 1-5-2004)
CSED after suspension and (resulting extension) based on bankruptcy: 5-10-2013
Maximum CSED extension of 5 years in connection with a partial payment installment agreement plus additional one year for payment skips, etc. See 5.14.2.1(7): 6 years
CSED after suspension (and resulting extension) based on the bankruptcy plus the maximum CSED extension of the partial payment installment agreement plus an additional one year for payment skips, etc.:

 

Thomas F. DiLullo, P.C.

A Hackensack law firm serving Bergen County, as well as, New Jersey, New York and Connecticut, and Federal tax cases nationwide.

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