- Which of the following is correct regarding the IRS's options?
Answer: The IRS may rescind the acceptance and resume collection of the original liability, reduced by the payments already made under the offer.
IRC § 7122 and the terms of the accepted Form 656 (Offer in Compromise). An accepted compromise remains binding while the taxpayer performs its terms. If the taxpayer defaults, for example by missing installment payments or failing to remain current on filing and payment obligations, the IRS may either collect the remaining amount of the offer or rescind the acceptance and reinstate the original liability, giving credit for payments already made. Choice C is correct. Choice A ignores the default remedies. Choice B is wrong because the original liability is not extinguished when the offer later goes into default. Choice D is wrong because payments made under an accepted offer are not refunded when the acceptance is rescinded.
- Which of the following is correct regarding the user fees for installment agreements and short-term payment plans in effect for 2025?
Answer: A direct debit installment agreement costs $22 when requested online and $107 when requested by telephone or in person.
The IRS installment agreement user fee schedule, set out in the Form 9465 instructions and in effect through December 31, 2025, charges $22 for a direct debit installment agreement requested online and $107 when the same agreement is requested by telephone, mail, or in person. Choice D states this correctly. Choice A misstates the low-income rule: for a qualifying low-income taxpayer the direct debit fee is waived, but a non-direct-debit agreement carries a $43 fee that is reimbursed only upon successful completion, so there is no waiver for every type of agreement. Choice B misstates the short-term plan: a plan of 180 days or less carries no user fee. Choice C misstates the channel: the $69 non-direct-debit fee applies only to online requests; by telephone, mail, or in person the fee is $178, even though the $43 low-income amount it cites is accurate.
- Which of the following is correct regarding his request?
Answer: He is not eligible for a guaranteed installment agreement because of the earlier agreement, but he qualifies for a streamlined installment agreement without a financial statement.
IRC § 6159(c). A guaranteed installment agreement requires an aggregate assessed balance of $10,000 or less, no installment agreement during the 5 preceding taxable years, and payment in full within 3 years. The taxpayer's 2021 through 2023 installment agreement falls within the 5-year period, so the guaranteed agreement is unavailable. Choice B correctly states the result: under the streamlined installment agreement procedures implementing IRC § 6159, an individual assessed balance of $25,000 or less payable within 72 months does not generally require a financial statement. Choice A ignores the prior-agreement condition. Choice C is wrong because the streamlined program remains available and does not require Form 433-A. Choice D misstates the lookback rule; a completed agreement still counts.
- Which of the following is correct regarding the termination of an installment agreement by the IRS?
Answer: The IRS may terminate an installment agreement when the taxpayer fails to pay an installment when due, but generally only after providing the taxpayer 30 days' written notice of the proposed termination.
IRC § 6159(b) and (e). The IRS may terminate, alter or modify an installment agreement if the taxpayer fails to pay an installment or another tax liability when due, fails to provide requested financial information, provided inaccurate or incomplete information, or has a significant change in financial condition, and it may terminate an agreement if collection is in jeopardy. Except in the jeopardy case, the action may not take effect until at least 30 days after the IRS gives the taxpayer notice explaining why it intends to act. A taxpayer may seek independent administrative review of a termination under IRC § 6159(e). Choice A is correct. Choice B is wrong because a significant improvement in the taxpayer's financial condition does not permit termination without notice; the 30-day notice requirement applies to that ground as well. Choice C is wrong because § 6159(b) contains no one-year protection; no such rule exists. The IRS may act on any of the statutory grounds at any time during the agreement, after giving the required notice. Choice D is wrong because the IRS does not need the taxpayer's consent to terminate an agreement, and the notice period is 30 days; there is no 90-day cure period.
- Which of the following is correct regarding an offer in compromise?
Answer: The IRS generally will not accept an offer in compromise if the liability could be paid in full through an installment agreement, and the taxpayer must have filed all required returns and be current on estimated tax payments before the offer is considered.
IRC § 7122 authorizes the IRS to compromise a liability, and the Form 656 instructions require the taxpayer to have filed all required returns and made required estimated tax payments before the offer will be considered; the IRS will not accept an offer when the liability could be paid in full through an installment agreement. Choice C states both requirements. Choice A misstates the grounds: doubt as to collectibility and effective tax administration are valid grounds, and a taxpayer who does not dispute the liability may submit an offer on those grounds. Choice B misstates the timing: when an offer is rejected, the suspension of the collection statute continues for 30 days after the rejection and during any appeal, so the suspension does not end immediately. Choice D misstates the evaluation standard: reasonable collection potential includes the taxpayer's equity in assets plus the present value of future income, so net equity alone is not the measure, and the IRS is not required to accept an offer merely because it exceeds net equity.
- Which of the following is correct regarding a streamlined installment agreement for 2025?
Answer: A streamlined installment agreement is generally approved without a financial statement when an individual's assessed balance is $25,000 or less and the liability will be paid within 72 months.
Streamlined installment agreements are approved under the IRS's streamlined criteria implementing IRC § 6159(a). An individual taxpayer with an assessed balance of $25,000 or less qualifies when the liability will be paid within 72 months (or before the collection statute expires, if sooner), and a financial statement is generally not required. Choice B states this rule. Choice A misstates the scope: the streamlined criteria do not cover a trust fund recovery penalty, and the $25,001-$50,000 tier is not available regardless of the payment method chosen. Choice C misstates the term: the streamlined term is 72 months, not 36 months, and a financial statement is generally not required. Choice D is wrong because the streamlined agreement also covers balances of $25,000 or less without any direct debit requirement; direct debit or payroll deduction is required only when the balance exceeds $25,000.
- Which of the following is correct regarding the proposed offer in compromise?
Answer: An offer in compromise is not realistic because he can pay the liability in full from available assets and his reasons are not the exceptional circumstances that effective tax administration requires.
Treas. Reg. § 301.7122-1(b). A doubt-as-to-collectibility offer requires a showing that the taxpayer cannot pay the full liability; with $260,000 in liquid assets against a $42,000 debt, that basis fails. An effective tax administration offer is available only where collection would create an economic hardship or would be inequitable, typically because of exceptional circumstances; the desire to preserve savings for retirement is not such a circumstance. Choice C is therefore correct. Choice A misstates the hardship standard; the use of savings to pay a debt is not economic hardship as a matter of law. Choice B is wrong because future disposable income is only one component of reasonable collection potential, which also includes net realizable equity in assets. Choice D is wrong because no categorical bar prohibits offers from taxpayers with liquid assets; the offer would be evaluated on its merits.
- Which of the following is correct regarding the IRS's authority to withdraw the notice of federal tax lien?
Answer: The IRS may withdraw the notice; entering into an installment agreement under § 6159, such as his direct debit agreement, is a statutory ground for withdrawal unless the agreement provides otherwise.
IRC § 6323(j)(1). The IRS may withdraw a notice of federal tax lien if the filing was premature or erroneous, if the taxpayer has entered into an installment agreement under § 6159 to satisfy the liability (unless the agreement provides otherwise), if withdrawal will facilitate collection of the tax, or if, with the consent of the taxpayer or the National Taxpayer Advocate, withdrawal is in the best interests of the taxpayer (as determined by the National Taxpayer Advocate) and of the United States. The taxpayer's installment agreement is therefore a statutory ground; the statute does not require that it be paid by direct debit. The IRS separately runs an administrative direct-debit withdrawal program with its own balance and payment criteria, but that is IRS policy, not the statutory test. A refinancing purpose by itself is not a statutory ground. Choice A is correct. Choice B confuses withdrawal of the notice with release of the lien under IRC § 6325; withdrawal does not require payment in full. Choice C ignores the installment-agreement ground and treats facilitation of collection as the only ground. Choice D is wrong because lien withdrawal is requested by the taxpayer, typically on Form 12277, and is not a determination made exclusively in a CDP hearing.
- Which of the following is correct regarding the offer?
Answer: The IRS may not accept the offer on the doubt-as-to-liability basis because the final court decision established the liability; the taxpayer may still pursue other collection alternatives.
Treas. Reg. § 301.7122-1(b)(1). Doubt as to liability exists where a taxpayer demonstrates a genuine dispute about the existence or amount of the correct tax liability, but it does not exist where the liability has been established by a final decision of a court of competent jurisdiction. The final, unappealed Tax Court decision establishes the liability, so the IRS should not accept the offer on the doubt-as-to-liability basis. Choice B is correct: that bar does not extinguish other collection alternatives, including installment agreements, currently not collectible status, or an offer based on a proper ground. Choice A states the general rule but ignores the final-decision exception. Choice C wrongly extends the bar to installment agreements. Choice D is wrong because the IRS does not convert an improperly based offer into another offer type; a new offer on a proper basis would be required.
- Which of the following is correct regarding the CNC status?
Answer: The IRS will not levy while the account remains in CNC, but interest and penalties continue to accrue and the collection statute is not suspended merely because the account is in CNC.
IRM 5.16 (Currently Not Collectible) and IRC § 6502(a). CNC status is a discretionary, temporary suspension of collection activity based on the taxpayer's inability to pay without economic hardship. It does not discharge the liability, stop statutory interest or penalties from accruing, or toll the 10-year collection statute, and refunds may still be offset against the debt. The IRS may later take the account out of CNC and resume collection if the taxpayer's financial condition improves. Choice D is therefore correct. Choice A states the opposite of the accrual and CSED rules. Choice C is wrong because CNC status does not block refund offset. Choice B is wrong because a CNC determination is not permanent.
- Which of the following is correct regarding their request?
Answer: They do not qualify at this balance for a streamlined agreement without direct debit or payroll deduction; with mailed checks, a regular agreement requiring financial information would apply.
Under IRC § 6159 and the IRS streamlined installment agreement procedures, an assessed balance of $25,000 or less can be paid within 72 months (or by the collection statute expiration date, if earlier) without a financial statement. For assessed balances from $25,001 to $50,000, streamlined terms are available to an individual or out-of-business sole proprietor only when the agreement is paid by direct debit or payroll deduction; at that balance, a mailed-check agreement does not qualify for the streamlined program and generally requires financial information. Because this couple owes $32,000 and will pay only by mailed checks, the streamlined option is unavailable, so Choice D is correct. Choice A ignores the payment-method condition for balances above $25,000. Choice B is wrong because the upper streamlined tier exists when the direct debit or payroll deduction requirement is met, and Choice C is wrong because a streamlined tier does exist for balances above $25,000 when that requirement is met.
- Which of the following is correct regarding installment agreements and payment plans requested through the Online Payment Agreement application in 2025?
Answer: An individual may use the online application to set up a long-term installment agreement when the combined balance of tax, penalties, and interest is $50,000 or less and all required returns have been filed.
The Online Payment Agreement application is the IRS's self-service portal for installment agreements under IRC § 6159(a). For individuals, the online application will establish a long-term installment agreement when the combined balance of tax, penalties, and interest is $50,000 or less and all required returns have been filed. Choice C states this rule. Choice A misstates the party: businesses cannot use the online application and must contact the IRS; no online business limit applies. Choice B misstates the short-term threshold: a short-term payment plan of 180 days or less is available online when the balance is less than $100,000, not $50,000. Choice D is wrong because the online application is not available for any balance, and a balance above $50,000 does not require a collection due process hearing to obtain an installment agreement.
- Which of the following is correct regarding the guaranteed installment agreement under IRC § 6159(c)?
Answer: An individual qualifies only if the tax owed, not counting interest and penalties, is $10,000 or less, the liability will be paid in full within three years, and in the preceding five years the individual has not failed to file a return or pay tax shown on a return or entered into an installment agreement.
Governing authority: IRC § 6159(c). The IRS must accept an installment agreement from an individual when the aggregate tax liability, determined without regard to interest, penalties, additions to tax, and additional amounts, is $10,000 or less; the individual has not, during the preceding five years, failed to file a required return, failed to pay a tax shown on a return, or entered into an installment agreement; the IRS determines the individual cannot pay in full when due; the agreement provides for full payment within three years; and the individual agrees to comply during the agreement. Choice A states required conditions correctly. Choice D misstates the measure of the limit: the $10,000 ceiling excludes interest and penalties, so an individual whose tax is $10,000 or less can qualify even if interest and penalties push the balance above $10,000. Choice B misstates the threshold and term: $25,000 and 72 months describe a streamlined agreement, not the guaranteed agreement. Choice C is wrong because the payment method does not replace the five-year compliance history.
- Which of the following is correct regarding her request?
Answer: She cannot use the online long-term agreement because the combined balance exceeds $50,000, but she may still apply for an installment agreement by phone or Form 9465.
IRC § 6159 and the IRS online payment agreement procedures (Form 9465 instructions). The online long-term payment agreement for individuals is limited to $50,000 of combined tax, penalties, and interest, and all required returns must be filed. Here the combined balance is $51,000, so the online long-term application is not available; the taxpayer may still obtain a regular installment agreement by telephone or by filing Form 9465, with financial information generally required. Choice A is correct. Choice B misstates the limit, which applies to the combined balance rather than the tax portion alone. Choice C invents a direct-debit exception to the online ceiling. Choice D is wrong because a balance above $50,000 is not a bar to an installment agreement; the online application limit is not an eligibility ceiling for all installment agreements.
- Which of the following is correct regarding an account that the IRS has reported as currently not collectible?
Answer: Interest and penalties continue to accrue while the account is currently not collectible, and the IRS may resume collection if the taxpayer's ability to pay improves before the collection statute expires.
IRS Pub. 594, The IRS Collection Process, describes currently not collectible status. CNC is a temporary suspension of collection when the taxpayer has no ability to pay and no assets from which the liability could be satisfied. Interest and penalties continue to accrue, the liability is not forgiven, and the IRS may resume collection if the taxpayer's financial condition improves before the collection statute expires. Choice B states the rule. Choice A confuses CNC with a partial payment installment agreement: CNC involves no payment schedule. Choice C misstates the procedure: no waiver of the collection statute is required to place an account in CNC status. Choice D misstates both the accrual rule and the lien rule: interest and penalties keep running during CNC, and reporting an account as currently not collectible does not release a filed notice of federal tax lien.
