[Federal Register Volume 59, Number 246 (Friday, December 23, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31425]


[[Page Unknown]]

[Federal Register: December 23, 1994]


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DEPARTMENT OF THE TREASURY
26 CFR Part 301

[TD 8583]
RIN 1545-AM66

 

Agreements for Payment of Tax Liabilities in Installments

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations regarding agreements 
for the payment of federal tax liabilities in installments under 
section 6159 of the Internal Revenue Code of 1986. These regulations 
reflect changes to the law made by section 6234 of the Technical and 
Miscellaneous Revenue Act of 1988 (TAMRA) (Pub. L. 100-647, 102 Stat. 
3573), which authorizes the use of written installment agreements if 
the Secretary determines that an installment agreement will facilitate 
collection of federal tax liabilities. These regulations affect persons 
who wish to enter into agreements to pay their tax liability in 
installments.

EFFECTIVE DATE: December 23, 1994.

FOR FURTHER INFORMATION CONTACT: Kevin Connelly, (202) 622-3640 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    On December 2, 1993, a notice of proposed rulemaking was published 
in the Federal Register (56 FR 63541). No public hearing was requested 
or held.
    Written comments responding to the notice were received. After 
consideration of all the comments, the proposed regulations are adopted 
as revised by this Treasury decision.

Explanation of Revisions and Summary of Comments

    An explanation of the regulations is contained in the preamble of 
the notice of proposed rulemaking, published in the Federal Register 
(56 FR 63541) on December 2, 1993. The following is an explanation of 
the comments that were received and the revisions that were made in 
response to the comments.
    The proposed regulations authorize the IRS to alter, modify, or 
terminate an installment agreement if a district director, a director 
of a service center, or a director of a compliance center (the 
director) determines that the financial condition of the taxpayer has 
significantly improved. Two commenters have suggested amending this 
provision to also authorize the IRS to alter or modify an agreement if 
the taxpayer's financial condition has deteriorated.
    The provision in the proposed regulations is intended to prohibit 
the IRS from amending or terminating an installment agreement 
unilaterally if a taxpayer's financial condition has deteriorated as 
long as the taxpayer continues to make timely payments. In order to 
preserve this prohibition and at the same time respond to the 
commenters' concern, a new provision has been added to the final 
regulations which allows the director, upon request by a taxpayer, to 
amend or terminate an installment agreement because of a deterioration 
(or other change) in the taxpayer's financial condition.
    The proposed regulations require the IRS to give notice at least 30 
days prior to altering, modifying, or terminating an installment 
agreement. One commenter has suggested that the IRS also should be 
required to give the taxpayer a 30-day written notification of any 
intent to deny an agreement and the opportunity to appeal. The Internal 
Revenue Code does not require the IRS to give 30 days notice of its 
intent to deny an installment agreement. Such a notice requirement 
would enable taxpayers to stop collection actions for 30 days simply by 
requesting an installment agreement. For these reasons, the commenters' 
suggestion has not been adopted.
    The proposed regulations provide that a written installment 
agreement may take the form of a document signed by the taxpayer and 
the director or a written confirmation of a verbal agreement entered 
into by the taxpayer and the IRS. A commenter has suggested that 
written installment agreements should be allowed only on standardized 
forms such as Forms 433-D or 9465, because agreements other than those 
on standardized forms may cause confusion or abuse.
    The IRS enters into two types of installment agreements. Written 
agreements on Forms 433-D, 433-G, and 2159, which are negotiated face-
to-face, are generally based on an exhaustive, written financial 
statement, and are signed by both the taxpayer and an employee of the 
IRS who has ``examined or approved'' the agreement. Other agreements 
are entered into by the Automated Collection System (ACS), the Service 
Center Collection Branch (SCCB), or Taxpayer Services (TS) either over 
the telephone or in response to a letter from a taxpayer. The 
agreements entered into by ACS, SCCB, or TS, which are neither 
negotiated face-to- face nor based on an in-depth examination of the 
taxpayer's financial condition, are confirmed in a letter from the IRS. 
The confirmation letter is signed by the IRS but not by the taxpayer.
    A provision requiring all written installment agreements to be on 
standardized forms signed by both parties would severely hamper the 
ability of ACS, SCCB, and TS to enter into installment agreements. The 
ACS, SCCB, and TS are bulk processing centers where installment 
agreements generally are entered into on the basis of a single contact 
with the taxpayer. If installment agreements entered into by ACS, SCCB, 
or TS had to be on standardized forms signed by both the IRS and the 
taxpayer, finalization of each agreement would have to be monitored by 
the ACS, SCCB, or TS contact employee, or by some other employee. Once 
an agreement were made, a confirmation letter would have to be 
forwarded to the taxpayer for signature. If the confirmation letter 
were not returned in a timely manner, the employee would have to send a 
follow-up letter. Once a signed letter were returned, the employee 
would have to associate the letter with the taxpayer's file, fill out 
proper paperwork, and perhaps send a final follow-up letter to the 
taxpayer. This would defeat the very purpose of bulk processing.
    Although the agreements entered into by ACS, SCCB, and TS are not 
on Forms 433-D, 433-G, or 9465, the confirmation letters sent by ACS, 
SCCB, and TS are based on model letters drafted by the IRS for the 
purpose of setting forth what is expected of the taxpayer. These 
letters, which set forth the terms of payment and the conditions on 
which the agreement is based, contain essentially the same information 
as the installment agreement forms. Therefore, there should be little 
or no confusion caused by the confirmation letters.
    Although a provision requiring all installment agreements to be on 
standardized forms has not been adopted, the final regulations have 
been amended to allow installment agreements to take the form of a 
written confirmation of an agreement proposed in writing by the 
taxpayer and accepted by the IRS, as well as a written confirmation of 
a verbal agreement entered into between the taxpayer and the IRS.
    A commenter has suggested that the proposed regulations be amended 
to make it clear that the IRS must give a 30-day notice of an intent to 
alter, modify, or terminate an agreement in all cases except where 
collection of the liability to which the installment agreement applies 
is in jeopardy. This suggestion has been adopted.
    It also has been suggested that the regulations should state 
explicitly that during the 30-day period the taxpayer may cure a 
default, correct inaccurate information, or provide additional 
information which will generally allow continuation of the original 
agreement. However, the reason for requiring written notification of an 
intent to alter, modify, or terminate an agreement is to give taxpayers 
the opportunity to show that the IRS has made a mistake. For example, 
if the IRS intends to terminate an agreement because it believes the 
taxpayer has given the IRS incorrect or incomplete information, the 
taxpayer will have thirty days to prove to the IRS that the taxpayer's 
information was correct and complete. The reason for the notification 
is not to allow the taxpayer to cure a default by correcting inaccurate 
information that the taxpayer gave the IRS during negotiations for an 
installment agreement. The regulations have been amended to provide 
that upon receiving notification that the IRS intends to alter, modify, 
or terminate an agreement the taxpayer may provide information to show 
that the IRS has made a mistake.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Small Business Administration for comment on its 
impact on small business.

Drafting Information

    The principal author of these regulations is Kevin Connelly, Office 
of Assistant Chief Counsel (General Litigation), IRS. However, other 
personnel from the IRS and Treasury Department participated in their 
development.

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for part 301 continues to read 
in part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 301.6159-1 is added under the undesignated center 
heading ``Place and Due Date for Payment of Tax'' to read as follows:


Sec. 301.6159-1  Agreements for payment of tax liability in 
installments.

    (a) Authority and definition. A district director, a director of a 
service center, or a director of a compliance center (the director) is 
authorized to enter into a written agreement with a taxpayer that 
allows the taxpayer to satisfy a tax liability by making scheduled 
periodic payments until the liability is fully paid if the director 
determines that such an installment agreement will facilitate the 
collection of the tax liability.
    (b) Acceptance, form, and term of installment agreement--(1) (i) 
Acceptance or rejection of installment agreement. The director has the 
discretion to accept or reject any proposed installment agreement. As a 
condition to entering into an installment agreement with a taxpayer, 
the director may require that--
    (A) The taxpayer agree to a reasonable extension of the period of 
limitations on collection; and
    (B) The agreement contain terms and conditions that protect the 
interests of the government.
    (ii) Example. The director may require that a taxpayer authorize 
direct debit bank transfers as the method of making installment 
payments under the agreement.
    (2) Form of installment agreement. A written installment agreement 
may take the form of a document signed by the taxpayer and the director 
or a written confirmation of an agreement entered into by the taxpayer 
and the director that is mailed or personally delivered to the 
taxpayer.
    (3) Term of accepted installment agreement. Except as otherwise 
provided in this section, an installment agreement is effective from 
the day the director signs the agreement to the day the agreement ends 
by its terms.
    (c) Alteration, modification, or termination of installment 
agreements by the Internal Revenue Service--(1) Inadequate information 
or jeopardy. The director may terminate an installment agreement if--
    (i) The director determines that the taxpayer or the taxpayer's 
representative has provided to the Internal Revenue Service information 
that is inaccurate or incomplete in any material respect in connection 
with the granting of the installment agreement; or
    (ii) The director determines that collection of any tax liability 
to which the installment agreement applies is in jeopardy.
    (2) Subsequent change in financial condition, failure to timely pay 
an installment or another Federal tax liability, or failure to provide 
requested financial information. The director may alter, modify, or 
terminate the terms of an installment agreement if--
    (i) The director determines that the financial condition of a 
taxpayer that is a party to the installment agreement has significantly 
improved; or
    (ii) The taxpayer that is a party to the installment agreement 
fails--
    (A) To timely pay any installment in accordance with the terms of 
the installment agreement;
    (B) To pay any other Federal tax liability when the liability 
becomes due; or
    (C) To provide updated financial information requested by the 
director.
    (3) Request by taxpayer. Upon request by a taxpayer that is a party 
to the installment agreement, the director may alter, modify, or 
terminate the terms of an installment agreement if the director 
determines that the financial condition of the taxpayer has 
significantly changed.
    (4) Notice. Unless the director determines that collection of the 
tax is in jeopardy, the director will notify the taxpayer in writing at 
least 30 days before altering, modifying, or terminating an installment 
agreement pursuant to paragraph (c)(1) or (2) of this section. A notice 
provided pursuant to this paragraph must briefly describe the reason 
for the intended alteration, modification, or termination. Upon 
receiving notice, the taxpayer may provide information showing that the 
reason for the intended alteration, modification, or termination is 
incorrect.
    (d) Actions by the Internal Revenue Service during the term of the 
installment agreement. Except as otherwise provided by the installment 
agreement, during the term of the agreement the director may take 
actions to protect the interests of the government with regard to the 
unpaid balance of the tax liability to which the installment agreement 
applies (other than actions pursuant to subchapter D of chapter 64 of 
subtitle F of the Internal Revenue Code against a person that is a 
party to the agreement), including any actions enumerated in the 
agreement. The actions include, for example--
    (1) Requesting updated financial information from any party to the 
agreement;
    (2) Conducting further investigations (including the issuance and 
enforcement of summonses) in connection with the tax liability to which 
the installment agreement applies;
    (3) Filing or refiling notices of federal tax lien; and
    (4) Taking collection action against any person who is not a party 
to the agreement but who is liable for the tax to which the agreement 
applies.
    (e) Termination. If an installment agreement is terminated by the 
director, the director may pursue collection of the unpaid balance of 
the tax liability.
    (f) Cross-reference. Pursuant to section 6601(b)(1), the last day 
prescribed for payment is determined without regard to any installment 
agreement, including for purposes of computing penalties and interest 
provided by the Internal Revenue Code.
    (g) Effective date. This section is effective December 23, 1994.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
    Approved: November 28, 1994.
Leslie Samuels,
Assistant Secretary of Treasury.
[FR Doc. 94-31425 Filed 12-22-94; 8:45 am]
BILLING CODE 4830-01-U