New Rules Allows you to make partial payment of Tax
Code section 6159 allows for the payment of delinquent tax debts in installments. Under some circumstances, the IRS is required to enter into an agreement allowing for the payment of delinquent taxes over time. However, much confusion arose in the past about whether the IRS could enter into an installment agreement if the tax could not be paid in full within the statutory collection period. I believe the IRS abused the situation and caused much hardship to people.
Whatever confusion may have existed is now eliminated by changes recently made to the tax code. The IRS no longer has ant excuses for denying an installment agreement or for imposing arbitrary excessive monthly payment amountsCif you know what your rights are.
Understanding the installment Agreement To Make Things Easier On You
Code section 6159(a) provides as follows:
The Secretary is authorized to enter into written agreements with ant taxpayer under such taxpayer is allowed to make payment on any tax in installment payments if the Secretary determines that such agreement will facilitate full or partial collection of such liability. (Emphasis.)
This means very simply that the IRS cannot impose upon you an arbitrary monthly payment amount in order to pay in full before the collection statute of limitations runs out. Instead, the IRS must take into consideration your monthly income and legitimate, necessary living expenses in determining your monthly payment.
For example, suppose you owe the IRS $30,000. Further suppose that the IRS had the full ten-year statutory period to collect the tax. This would require a payment of $250 per month over ten years, not including penalties and interest. When penalties and interest are added, the amount would likely triple to about $750 per month.
But suppose the citizen’s monthly income and expenses are such that he can only afford to pay, say, $400 per month. Under the old rules, the IRS would not consider entering into an agreement in that case. Instead, the IRS would move to enforce collection through wage and bank levies. Of course, that only served to cause a serious financial hardship for the citizen and often, drove people underground. Many people facing this action reason that they must do whatever is necessary to feed their families.
New Rules can Avoid Financial Hardship In Bad or Unexpected Situations
The new rules should help greatly to avoid financial hardship if the IRS proceeds in good faith. The plain language of the law reads that the installment agreement should be considered by the IRS even if the agreement will not fully pay the tax within the statutory collection period, as is the case in the example above.
The law creates a mandatory review process. In any situation where the IRS has entered into an agreement that will not pay the tax in full, the IRS is required “review the agreement at least once every two years.” Code section 6159(d). The review is carried out by soliciting and obtaining from the citizen current financial information, including all data showing current income and expenses, assets and liabilities.
Failure by the citizen to provide the updated data will lead to cancellation of the agreement under code section 6159(b)(4).
If you’re facing a tax debt that you can’t pay in full, be sure you understand these rules. They will help you to avoid crushing collection action by the IRS. If you’re in doubt about your rights in this situation, do not hesitate to call my office for a free consultation. We can help you keep the IRS from attaching your paycheck or bank account.
For a FREE Consultation on solving your IRS problem call at 1-800-209-5770.