IRS Law Blog

Without warning, it appears in the mail:  An IRS notice (CP 522P) informing you that they want to conduct a review your installment agreement.

And even worse, the notice threatens that the IRS will terminate your agreement if you do not act in 10 days.

Your heart feels like it wants to skip a beat; maybe some panic and IRS anxiety sets in.

You have been making your monthly installment payments on time.

You have not incurred any new tax liabilities.

And you have filed and paid all of your most recent taxes, as the terms of the installment agreement require.

In other words, you have done everything the IRS requested of you – why, then the threats and need to review your agreement?

The answer is found in our tax laws:  Internal Revenue Code Section 6159(d) requires the IRS to review an installment agreement every two years if the amount of the payment will never pay the IRS debt in full. (The IRS has 10 years to collect a tax liability).  The IRS can also request a review of your agreement if they have information that makes them believe that your income has increased and you could possibly start paying more.

You may not have realized it, but you were in a partial pay installment agreement. It does not matter how good you have been in staying in compliance with the IRS; if you are in a partial pay agreement, expect them to reopen your case file every two years.

What IRS wants is a new financial statement from you to determine if they can increase the amount of your payment.

Here’s a road map of how to respond to the IRS notice, and what to expect as you do:

First, the 10 days the IRS is allowing to respond may not be enough time for us to pull together a financial statement.  If so, we need to call the IRS at the number provided within 10 days and request an additional two weeks’ time.  The phone number should route us to an IRS 1-800 call center in Philadelphia.  The agent we speak with should be empowered to grant the additional time.

Next, you will need to complete IRS Form 433F, Collection Information Statement. Remember, the IRS wants to know if your payment can increase, and to do that they will want to update where you bank and work, how much you make, and review your monthly budget.  The Form 433F is an IRS-designed financial statement and the tool they use to compile information about your finances.

In that regard, we need to be prepared to provide documents that verify the information on the 433F, including recent bank statements, paystubs, and possibly verification of your living expenses (like housing/utilities, car payments, student loans and out of pocket medical expenses).

Based on the 433F, we will then need to call the IRS to renegotiate your payment plan – the amount can go up, stay the same, or, yes, even go down.

Bear in mind that there is not one IRS agent assigned to your installment agreement review.  The notice to review your installment agreement was sent by an IRS computer. The IRS likely programmed their computers to send the two yeaer review letter to you when your agreement was initially made.

When we call in, it will be random as to whom we negotiate with, and we have to be prepared to handle every possibility of the range of an IRS agent’s demeanor.  The agent could be accommodating and fair-minded, or overbearing and difficult.

From here, there a few possible outcomes:

• We agree to new payment terms with the IRS.  And yes, if the new payment does not pay what you owe in full, we can expect another review in two years. In the meantime, you have peace with the IRS, and can live your life and manage your finances without any levies on your accounts or wages.

• We cannot agree to new terms.

• The additional two weeks the IRS provides to negotiate is not enough time for you to gather your records and provide a financial statement.

And it’s okay – if we cannot agree to new terms with the IRS agent manning the 1-800 phone lines, or the additional time the IRS gives us is not enough, there are still options.

We are not by any means at the end of the road.

Most importantly, a failure to agree to terms in calling the IRS 1-800 number should not jeopardize your wages, bank accounts or other property.

Simply put, the IRS cannot get to your wages, accounts or property while you are in an installment agreement.  And, all appearances aside, you are still in the agreement.

The IRS letter you received simply requested a review; it did not notify you that the agreement is being terminated.

To terminate your installment agreement, the IRS has to send another letter, Notice of Intent to Terminate Your Installment Agreement, (CP523).  By law, you are still in the agreement and the IRS cannot levy you until 30 days after they send you the notice to terminate the agreement. That notice has not yet been sent, and you are safe.

And you still have rights even after receiving the notice of terminated installment agreement.  Within 60 days, an appeal can be filed that disputes the termination, and requesting that your case be assigned to an IRS appeals officer for further negotiations.

The appeal gets you two benefits in negotiations:  (1) The IRS will continue to be unable to levy you while the appeal is pending, and (2) the appeal takes the case away from the 1-800 number IRS call centers and puts the case in the hands of an IRS appeals officer. That means we will be dealing with one person in our negotiations, usually a benefit over the 1-800 IRS call centers.

An IRS notice requesting a review of your installment agreement is not the same as an IRS notice terminating the agreement.  Sure, the IRS will need to be dealt with and a new agreement negotiated.  But the important part is to know that you have options and are not in immediate jeopardy.

Right now, all that is on the table is the knowledge that we will need to renegotiate. There are several ways to do that, from calling the 1-800 number to negotiating with IRS appeals, all while protecting your wages, accounts and property from the IRS and giving you peace of mind.