CTRS CTRS Installment Agreements and Payment Plans 2 — Questions and Answers
Question 1: What is the IRS's 'Fresh Start' initiative and how did it affect installment agreement thresholds?
- Fresh Start expanded the Streamlined IA threshold from $25,000 to $50,000 and extended the payment term from 60 to 72 months (Correct answer)
- Fresh Start eliminated all penalties for first-time delinquent taxpayers
- Fresh Start reduced interest rates on installment agreements to 1%
- Fresh Start created a new OIC category for taxpayers with student loan debt
Correct answer: Fresh Start expanded the Streamlined IA threshold from $25,000 to $50,000 and extended the payment term from 60 to 72 months
The IRS Fresh Start initiative, launched in 2011 and expanded in 2012, raised the Streamlined IA threshold to $50,000 and extended the maximum payment term to 72 months, making installment agreements more accessible.
Question 2: Under what circumstances can the IRS default or terminate an existing installment agreement?
- If the taxpayer fails to make a required payment, fails to file a required return, or incurs a new tax liability (Correct answer)
- Only if the taxpayer misses three consecutive payments
- Only if the taxpayer's income increases above the original threshold
- Only at the end of the calendar year during an annual review
Correct answer: If the taxpayer fails to make a required payment, fails to file a required return, or incurs a new tax liability
The IRS may default an IA if the taxpayer misses a payment, fails to file a required tax return, incurs a new tax liability, or provides inaccurate financial information.
Question 3: What is a 'Currently Not Collectible' (CNC) status and how does it compare to an installment agreement?
- CNC is a temporary hardship status that suspends collection activity without requiring payments, unlike an IA which requires monthly payments (Correct answer)
- CNC is identical to an IA but with a zero monthly payment amount
- CNC permanently eliminates the tax liability, while an IA requires full payment
- CNC is only available for taxpayers who have filed for bankruptcy
Correct answer: CNC is a temporary hardship status that suspends collection activity without requiring payments, unlike an IA which requires monthly payments
CNC status (hardship status) temporarily halts IRS collection activity when a taxpayer has no ability to pay, while an installment agreement requires regular monthly payments toward the balance.
Question 4: What is the In-Business Trust Fund Express Installment Agreement (IBTF-Express IA)?
- An installment agreement for businesses with payroll tax liabilities up to $25,000 that can be paid within 24 months without a financial statement (Correct answer)
- An agreement for individual taxpayers with trust fund penalties up to $50,000
- An expedited agreement for sole proprietors filing Schedule C
- A special agreement for tax professionals managing client trust funds
Correct answer: An installment agreement for businesses with payroll tax liabilities up to $25,000 that can be paid within 24 months without a financial statement
The IBTF-Express IA is available to businesses (except sole proprietors) with payroll tax liabilities of $25,000 or less that can be paid within 24 months, without requiring financial disclosure.
Question 5: Can a taxpayer request an installment agreement while a Collection Due Process hearing is pending?
- Yes, and proposing an installment agreement is one of the collection alternatives that can be raised at a CDP hearing (Correct answer)
- No, CDP hearings automatically suspend all payment arrangement requests
- Only if the taxpayer withdraws the CDP hearing request first
- Only if the taxpayer has no prior installment agreements on record
Correct answer: Yes, and proposing an installment agreement is one of the collection alternatives that can be raised at a CDP hearing
A taxpayer can propose an installment agreement as a collection alternative during a CDP hearing, and the IRS Appeals officer must consider it as part of the resolution process.
Question 6: What financial disclosure form must accompany a request for a non-streamlined installment agreement for an individual taxpayer owing more than $50,000?
- Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) (Correct answer)
- Form 433-B (Collection Information Statement for Businesses)
- Form 433-F (Collection Information Statement)
- Form 656 (Offer in Compromise)
Correct answer: Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals)
Individual taxpayers requesting installment agreements on balances exceeding $50,000 must submit Form 433-A to document their financial situation for IRS review.
CTRS CTRS Installment Agreements and Payment Plans 2
What is the IRS's 'Fresh Start' initiative and how did it affect installment agreement thresholds?