CTRS CTRS Installment Agreements and Payment Plans 3

Question 1

What is the federal funds rate relationship to IRS interest on underpayments?

Accepted Answer

IRS interest on underpayments is the federal short-term rate plus 3 percentage points, compounded daily

Answer

Under IRC §6621, the underpayment interest rate is the federal short-term rate plus 3 percentage points, adjusted quarterly and compounded daily.

Question 2

What is the failure-to-pay penalty rate and how does it interact with an installment agreement?

Accepted Answer

0.5% per month up to 25% of the unpaid tax, reduced to 0.25% per month while an IA is in effect

Answer

The failure-to-pay penalty is 0.5% per month (up to 25% maximum), but it is reduced to 0.25% per month once an installment agreement is approved and in effect.

Question 3

What is a 'full pay' installment agreement and when is it typically required?

Accepted Answer

An IA structured to pay the entire liability before the CSED expires, often required when the RCP equals or exceeds the full balance

Answer

A full pay IA is structured to fully satisfy the liability before the CSED expires; the IRS typically requires this when the taxpayer's RCP indicates they can afford to pay the full amount over time.

Question 4

Can business entities (corporations, partnerships, LLCs) use the Streamlined Installment Agreement?

Accepted Answer

Yes, businesses can use a Streamlined IA for income tax balances up to $25,000 payable within 24 months

Answer

Businesses (non-sole proprietor entities) may use a Streamlined IA for income tax balances up to $25,000 payable within 24 months, which is a lower threshold and shorter term than the individual Streamlined IA.

Question 5

What notice must the IRS send before terminating an existing installment agreement?

Accepted Answer

A 30-day notice (CP523) informing the taxpayer of the intent to terminate and their right to appeal

Answer

The IRS must send CP523 (Intent to Terminate Your Installment Agreement) giving the taxpayer 30 days to cure the default or appeal the termination.

(CTRS) Certified Tax Resolution Specialist Practice Test

(CTRS) Certified Tax Resolution Specialist Practice Test

CTRS CTRS Installment Agreements and Payment Plans 3