A taxpayer whose installment agreement is monitored by the IDRS will receive Notice CP 523, Defaulted Installment Agreement – Notice of Intent to Levy. A defaulted installment agreement may be reinstated without manager approval if it is determined that the agreement was terminated “because of an additional liability and if addition of that new liability will result in no more than two additional monthly payments and the agreement will not extend beyond the Collection Statute Expiration Date (CSED)” (“Section 11. Defaulted Installment Agreements, Terminated Agreements and Appeals of: Proposed Terminations (Defaults), and Terminated Installment Agreements”).
The IRS will first make a lien determination before considering the request for reinstatement. Default and reinstatement terminations due to the taxpayer missing and/or skipping payments will require manager approval.
The taxpayer may request a Collection Appeals Program (CAP) hearing to discuss the proposed terminations and actual terminations of installment agreements. The law provides for the taxpayer to appeal a termination of an installment agreement.
See the Regular Installment Agreement (Over $50,000) section. The IDRS stands for Integrated Data Retrieval System, “a mission critical system consisting of databases and operating programs that support IRS employees working active tax cases within each business function across the entire IRS” (IRS.gov, “Integrated Data Retrieval System (IDRS) – Privacy Impact Assessment,” 8/21/2013).
As a warning ... if the taxpayer ends up defaulting on their installment plan and becomes subject to collection activity, this is probably one of the first places that the IRS will hit with a levy action.
Tax payment plans are fairly easy to navigate if you follow all of the IRS’s requirements.
Generally, it is better that taxpayers try to meet all of these requirements before trying to set up a tax payment plan with the IRS because it will minimize the time that they may be exposed to active IRS collections and adverse collection activity.
Doing so will also expedite the process and will minimize the headache involved in dealing with the IRS. I have coached many taxpayers through setting up their own tax payment plans using these very steps. It is not rocket science. Follow the rules and make your required payments on time.
However, if you find yourself in a situation where you are unable to keep up with your payments or comply with any other issues of your installment agreement, give me a call. I have helped clients iron out their installment agreement problems and prevented the IRS from terminating the agreement. Regardless of your situation, I cannot stress the importance of staying in touch with the IRS; this is no time to bury your head in the sand.