[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