Direct Debit Installment Agreement Procedures Addressing Taxpayer Defaults Can Be Improved

The Director, Collection, Small Business/Self-Employed Division, should consider establishing systemic programming to allow DDIA taxpayers who incur a new unpaid tax liability to absorb the new liability into the current agreement without stopping the automatic payment in certain situations, such as when the payment amount does not change or when the number of additional payments does not increase by a specified number. This would require revisions to Form 9465, Installment Agreement Request, and Form 433-D, Installment Agreement, to request taxpayer agreement at the time the DDIA is established.

The Director, Collection, Small Business/Self-Employed Division, should, in the interim, provide taxpayers with information on Form 9465, Installment Agreement Request, and Form 433-D, Installment Agreement, as to how they can avoid a default of their DDIA in the event of a new unpaid liability.

The Director, Collection, Small Business/Self-Employed Division, should, for taxpayers who do not meet the criteria in Recommendation 1, such as when the new tax liabilities exceed the streamline criteria or when taxpayers are unable to afford increased installment agreement payments, establish procedures so that direct debit payments do not stop while the DDIA is suspended and the Internal Revenue Service (IRS) actively addresses the new balance due.