Friday, August 31, 2012

IRS installment agreements



Section 301.6159-1(b): Procedures for submission and consideration of proposed installment agreements.

Section 301.6159-1(b) of the proposed regulations provided that an installment agreement request must be submitted according to procedures prescribed by the IRS. It did not require the IRS to accept or reject the request within a specific time frame. The commenter proposed to limit the IRS’s time to consider an installment agreement to 90 days; if the IRS fails to act in that time, the agreement would be granted automatically. The commenter reasoned that the limited time frame would benefit the IRS because more installments agreements would be automatically allowed, thereby increasing revenues, and would benefit the taxpayer by allowing payments to begin quickly and efficiently. The recommendation was not adopted for two reasons. First, the IRS already grants installment agreements quickly and automatically in the vast majority of cases. If the taxpayer owes less than $25,000 and offers to pay the liabilities in full within 5 years, the agreement can be granted automatically under the IRS’s “streamlined” installment agreement procedures. See Internal Revenue Manual 5.14.5.2 at http://www.irs.gov/irm/part5/ irm_05-014-005.html. The IRS granted over 2.62 million installment agreements in fiscal year 2008, of which over 2.51 million were granted through the IRS’s streamlined procedures. In cases that do not meet the streamlined criteria, the IRS has determined that a more detailed review of the taxpayer’s financial situation is warranted. Second, the IRS generally responds to non-streamlined installment agreement requests in a timely manner. During the filing season, however, inventory fluctuations may cause delays. The automatic allowance of installment agreements in such cases would not be appropriate.
Proposed § 301.6159-1(b)(2) provided that an installment agreement request becomes pending when it is accepted for processing. The commenter recommended that the IRS send an automatically-generated response acknowledging the date of acceptance for processing to the taxpayer and the taxpayer’s representative. This recommendation was not adopted. The vast majority of installment agreements are streamlined agreements, which the IRS accepts very quickly. The IRS will, however, consider adopting an administrative procedure for the minority of cases where it anticipates a time lag between acceptance for processing and the acceptance or rejection of the installment agreement.
Proposed §301.6159-1(b)(2) also provided that if an installment agreement request does not contain sufficient information to permit the IRS to evaluate whether the request should be accepted, the IRS will request the needed information. The commenter recommended that all requests for additional information should be reasonably necessary. The proposed regulations already address this recommendation by directing that requests be for “needed” information.
Proposed §301.6159-1(b)(3) allowed a taxpayer to submit a good faith revision of a rejected installment agreement request within 30 days of rejection. The commenter recommended that the time for taxpayers to submit a good faith revision should be extended to 60 days because taxpayers often have difficulty obtaining the necessary documents within 30 days. This recommendation was not adopted. The recommendation would apply to a small number of installment agreement requests that are not accepted under the IRS’s streamlined procedures. In these cases, the IRS requests the information necessary for a financial analysis before rejecting the installment agreement request. See Internal Revenue Manual 5.15.1.6 at http://www.irs.gov/irm/part5/irm_05-015-001.html. Allowing 60 days following the rejection would encourage untimely responses and delay case resolution.

Section 301.6159-1(c): Acceptance, form, and terms of installment agreements.

Section 301.6159-1(c)(1) of the proposed regulations provided that an installment agreement request has not been accepted until the IRS notifies the taxpayer or the taxpayer’s representative of the acceptance. Section 6159(a) requires that an installment agreement be in writing, and proposed §301.6159-1(c)(2) provided that the writing may take the form of a document signed by the taxpayer and the IRS or the written confirmation of an agreement entered into by the taxpayer and the IRS that is mailed or personally delivered to the taxpayer. The commenter recommended that the IRS’s notification of the acceptance or rejection of a proposed installment agreement also be directed to the taxpayer’s representative and include the terms of the agreement and payment submission information. These recommendations were not adopted in the regulations because they are more appropriately addressed in the IRS’s procedures. The IRS currently does, however, provide written notification to the taxpayer and the taxpayer’s representative of the acceptance or rejection of an installment agreement and the suggested information.
The commenter was concerned that the IRS intended to change its streamlined procedures and recommended that the procedures be retained. The commenter was also concerned that proposed §301.6159-1(c)(3)(iii)(A) may represent a departure from the IRS’s current policy that limits the acceptance of extensions of the collection statute of limitations in connection with installment agreements to the narrow subset of partial payment installment agreements in which the liability will not be paid in full under the agreement before the collection statute expires. As stated in the preamble to the notice of proposed rulemaking, the regulations were intended to reflect existing practices. The regulations will have no effect on the IRS’s streamlined procedures or its policy with regard to waivers of the collection statute.
The commenter stated that the proposed regulations did not explain the inclusion of §301.6159-1(c)(3)(ii), which provided that an installment agreement may, by its terms, end upon the expiration of the period of limitations on collection, or at some prior date. As explained in the preamble to the proposed regulations, this provision clarifies that the IRS may enter into partial payment installment agreements that end upon the running of the collection statute, or that end prior to that time so that the IRS may collect the balance of the tax liability against any property belonging to the taxpayer before the collection period expires. The IRS does not currently enter into partial payment installment agreements that expire before the end of the collection statute and has no plans to do so routinely in the future.
Proposed §301.6159-1(c)(3)(v) provided that while an installment agreement is in effect, the IRS may request a financial condition update from the taxpayer at any time. The commenter recommended that the IRS be permitted to request only one financial condition update per year. This recommendation was not adopted. The IRS very rarely requests updates more than once a year. In certain rare circumstances, more frequent updates may be appropriate, such as when the IRS has reason to believe that the taxpayer’s financial condition has improved.

Section 301.6159-1(d): Rejection of a proposed installment agreement.

Section 301.6159-1(d)(2) of the proposed regulations provided that the IRS may not notify a taxpayer or the taxpayer’s representative of the rejection of an installment agreement until an independent review of proposed rejection is completed. The commenter was concerned that the proposed regulations did not provide any guidance as to how the independent administrative review will be assured. The commenter recommended that the review be undertaken by an IRS office located in a different territory. The recommendation was not adopted. Managers in the IRS offices in San Jose, California, and Jacksonville, Florida, supervise employees throughout the United States who review rejected installment agreements. An independent review is assured by assigning these cases to an employee who has no prior involvement in the case and who reports to a supervisor in either of these two offices.
The commenter recommended that the determination that the taxpayer did not submit a good faith revision be subject to independent administrative review. This recommendation was not adopted because it would delay case resolution and would, in effect, treat requests that were not made in good faith as valid requests. The commenter also recommended that the rejection of revisions that were made in good faith receive independent review. The proposed regulation already provided for this review. Proposed §301.6159-1(b) stated that if the IRS determines that the taxpayer made a good faith revision within 30 days of the rejection, the provisions of §301.6159-1 apply to the revised proposal.
Proposed §301.6159-1(d)(3) provided that a taxpayer may appeal the rejection of an installment agreement request within 30 days of the rejection. The commenter recommended that the 30-day period be tolled while a revised proposal of a rejected request is being evaluated so that the taxpayer would not have to file an appeal while the revision is under consideration. This recommendation was not adopted. The IRS’s procedures are designed to allow a quick resolution of the taxpayer’s request; tolling the appeal period would add an unneeded layer of complexity to the process and delay case resolution. The commenter also recommended that the IRS provide more definitive guidance as to what qualifies as a good faith revision. This recommendation was not adopted because this guidance is more appropriately left to the IRS procedures.

Section 301.6159-1(e): Modification or termination of installment agreements by the Internal Revenue Service.

Proposed §301.6159-1(e)(2)(i) provided that the IRS may modify or terminate an installment agreement if the IRS determines that the financial condition of the taxpayer has significantly changed. Proposed §301.6159-1(c)(3)(vi) provided that the IRS and the taxpayer may agree to modify or terminate an installment agreement or may agree to a new installment agreement that supersedes the existing agreement. The commenter recommended that the regulations explicitly allow taxpayers to request a modification or termination of an existing installment agreement, as was stated in existing §301.6159-1(c)(3). This clarification was adopted in §301.6159-1(e)(3).
The commenter recommended that the regulations require the taxpayer to comply with the terms of an installment agreement while a request for modification is being considered and that a proposed modification will not result in a suspension of the statute of limitations on collection. These clarifications were also adopted in §301.6159-1(e)(3).
The commenter recommended that a taxpayer’s request to modify an existing installment agreement should be exempt from user fees under regulations §§300.1 and 300.2. This recommendation was not adopted because user fees are outside the scope of this regulation project.
Proposed §301.6159-1(e)(2)(ii)(C) provided that the IRS may modify or terminate an installment agreement if the taxpayer fails to provide a financial condition update requested by the IRS. The commenter recommended that the regulations provide explicitly whether the IRS may terminate an installment agreement if the taxpayer provided materially inaccurate or incomplete information. This recommendation was adopted. Section 301.6159-1(e)(1)(i) was revised to clarify that the IRS may terminate an installment agreement if the taxpayer provided materially inaccurate or incomplete information in connection with a requested financial update.
Proposed §301.6159-1(e)(3) provided that the IRS will generally notify the taxpayer in writing at least 30 days prior to terminating an installment agreement and describe the reason for the termination, after which the taxpayer may provide information showing that the IRS’s reason is incorrect. Proposed §301.6159-1(e)(4) provided for the administrative appeal of the modification or termination of an installment agreement to the Office of Appeals if the request is properly made within 30 days after the termination or modification is to take effect. The commenter recommended that the regulations clarify that an appeal should be made to the Office of Appeals within 30 days after the modification or termination will take effect, regardless of whether the taxpayer submits additional information under §301.6159-1(e)(3), has filled out Form 9423, “Collection Appeal Request,” or has requested a meeting with a Collection Manager. This recommendation was not adopted in the regulations because it is more appropriately addressed in IRS forms and procedures.
Proposed §301.6159-1(e)(4) provided, in part, that the taxpayer may administratively appeal the modification or termination of an installment agreement to the Office of Appeals. The commenter recommended that the taxpayer be allowed to appeal the IRS’s determination not to modify an installment agreement. This recommendation was not adopted. The IRS routinely grants taxpayer modification requests that result in agreements within the streamlined criteria. See Internal Revenue Manual 5.19.1.5.4.24 at http://www.irs.gov/irm/part5/irm_05-019-001.html. Taxpayers do not have a statutory right to appeal rejected modification requests, and the IRS has not determined there is a need for additional administrative review of the denial of a modification request.

Section 301.6159-1(f): Effect of installment agreement or pending installment agreement on collection activity.

Section 301.6159-1(f)(1) of the proposed regulations stated that the IRS may not levy during the time an installment agreement is pending. Proposed §301.6159-1(f)(2) stated that levy is not prohibited if an installment agreement request was made solely to delay collection. The commenter recommended that the solely to delay collection standard in the proposed regulations be replaced with language that references the “frivolous submission” standard in section 6702(b) of the Code. This recommendation was not adopted. Under existing IRS procedures, an installment agreement is returned as made solely to delay collection when there is no economic reality to the request, the request fails to address changes previously requested by the IRS in response to a prior request, the request ignores direction provided by revenue officers, the request is made by a taxpayer that has defaulted prior installment agreements, or the request is made at a time that causes it to be classified as a request made to delay enforcement action. See Internal Revenue Manual 5.14.3.2 at http://www.irs.gov/irm/part5/ irm_05-014-003.html. Section 6702(b) imposes a $5,000 penalty for installment agreement requests that reflect a desire to delay or impede the administration of the Federal tax laws, and the IRS has not yet developed procedures defining the kinds of installment agreements that constitute frivolous submissions. The standard in section 6702(b) therefore may not be an appropriate standard for identifying those installment agreements that fail to qualify for the prohibition against levy.
In the alternative, the commenter recommended that the regulations state that a taxpayer may appeal the IRS’s levy action when the IRS determines that an installment agreement request was made solely to delay collection, and that damages may be appropriate under section 7433 of the Code. These recommendations were not adopted. Taxpayers’ rights to appeal proposed levies and seek damages are provided for in the regulations under sections 6330 and 7433 of the Code, respectively.

Section 301.6159-1(g): Suspension of the statute of limitations on collection.

Section 301.6159-1(g) of the proposed regulations provided that the statute of limitations on collection under section 6502 of the Code is suspended for the period that a proposed installment agreement is pending, plus 30 days following a rejection, and during any appeal. The commenter recommended that the regulations clearly define when an installment agreement is pending. This recommendation is already addressed by proposed §301.6159-1(b)(2), which provides a detailed explanation of when an installment agreement is pending.

Section 301.6159-1(h): Annual statement.

Section 301.6159-1(h) of the proposed regulations requires the IRS to provide taxpayers with an annual statement setting forth the balance owed at the beginning of the year, the payments made during the year, and the remaining balance at the end of the year. The commenter recommends that the annual statement be as clear as possible and that the IRS provide the taxpayer with a single annual statement describing all tax liabilities covered by the agreement. Currently, the IRS sends an annual statement for each separate liability covered by an installment agreement. No change was made to the final regulations because this recommendation is more appropriately addressed when the IRS updates the forms used for the annual statements.

Section 301.6159-1(i): Biennial review of partial payment installment agreements.

Section 301.6159-1(i) of the proposed regulations required the IRS to perform a review of the taxpayer’s financial condition at least once every two years in cases of partial payment installment agreements. The proposed regulations also stated that the purpose of the review was to determine whether an increase in payments is warranted. The commenter recommended that §301.6159-1(i) be rephrased to provide that the biennial review of a taxpayer’s financial condition may result in a decrease, as well as an increase, in the amount of payments being made. This recommendation was not adopted. While taxpayers may request a decrease in the amount of payments due under an installment agreement, the IRS does not have the information to unilaterally make that determination. The automatic biennial review done by the IRS does not, in every case, result in a request for updated financial information. As explained above, taxpayers may request that their payments be lowered if their financial condition has worsened.

Section 301.6159-1(k): Effective/applicability date.

Section 301.6159-1(k) of the proposed regulations provided that the effective date of the final regulations would be the date the final regulations are published in the Federal Register. The commenter was concerned about how previously proposed or accepted installment agreements will be affected by the regulations and recommended that the effective date of paragraphs (b), (c), and (d) apply prospectively. This recommendation was not adopted. As explained earlier and in the preamble to the proposed regulations, the regulations substantially reflect existing practices. The regulations will therefore have no effect on previously proposed or accepted installment agreements.

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 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) does not apply to these regulations, and because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the proposed regulations preceding these regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

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 301.6159-0 is added to read as follows:

§301.6159-0 Table of contents.

This section lists the major captions that appear in the regulations under §301.6159-1.

§301.6159-1 Agreements for the payment of tax liabilities in installments.

(a) Authority.
(b) Procedures for submission and consideration of proposed installment agreements.
(c) Acceptance, form, and terms of installment agreements.
(d) Rejection of a proposed installment agreement.
(e) Modification or termination of installment agreements by the Internal Revenue Service.
(f) Effect of installment agreement or pending installment agreement on collection activity.
(g) Suspension of the statute of limitations on collection.
(h) Annual statement.
(i) Biennial review of partial payment installment agreements.
(j) Cross reference.
(k) Effective/applicability date.
Par. 3. Section 301.6159-1 is revised to read as follows:

§301.6159-1 Agreements for payment of tax liabilities in installments.

(a) Authority. The Commissioner may enter into a written agreement with a taxpayer that allows the taxpayer to make scheduled periodic payments of any tax liability if the Commissioner determines that such agreement will facilitate full or partial collection of the tax liability.
(b) Procedures for submission and consideration of proposed installment agreements—(1) In general. A proposed installment agreement must be submitted according to the procedures, and in the form and manner, prescribed by the Commissioner.
(2) When a proposed installment agreement becomes pending. A proposed installment agreement becomes pending when it is accepted for processing. The Internal Revenue Service (IRS) may not accept a proposed installment agreement for processing following reference of a case involving the liability that is the subject of the proposed installment agreement to the Department of Justice for prosecution or defense. The proposed installment agreement remains pending until the IRS accepts the proposal, the IRS notifies the taxpayer that the proposal has been rejected, or the proposal is withdrawn by the taxpayer. If a proposed installment agreement that has been accepted for processing does not contain sufficient information to permit the IRS to evaluate whether the proposal should be accepted, the IRS will request the taxpayer to provide the needed additional information. If the taxpayer does not submit the additional information that the IRS has requested within a reasonable time period after such a request, the IRS may reject the proposed installment agreement.
(3) Revised proposals of installment agreements submitted following rejection. If, following the rejection of a proposed installment agreement, the IRS determines that the taxpayer made a good faith revision of the proposal and submitted the revision within 30 days of the date of rejection, the provisions of this section shall apply to that revised proposal. If, however, the IRS determines that a revision was not made in good faith, the provisions of this section do not apply to the revision and the appeal period in paragraph (d)(3) of this section continues to run from the date of the original rejection.
(c) Acceptance, form, and terms of installment agreements—(1) Acceptance of an installment agreement—(i) In general. A proposed installment agreement has not been accepted until the IRS notifies the taxpayer or the taxpayer’s representative of the acceptance. Except as provided in paragraph (c)(1)(iii) of this section, the Commissioner has the discretion to accept or reject any proposed installment agreement.
(ii) Acceptance does not reduce liabilities. The acceptance of an installment agreement by the IRS does not reduce the amount of taxes, interest, or penalties owed. (However, penalties may continue to accrue at a reduced rate pursuant to section 6651(h).)
(iii) Guaranteed installment agreements. In the case of a liability of an individual for income tax, the Commissioner shall accept a proposed installment agreement if, as of the date the individual proposes the installment agreement—
(A) The aggregate amount of the liability (not including interest, penalties, additions to tax, and additional amounts) does not exceed $10,000;
(B) The taxpayer (and, if the liability relates to a joint return, the taxpayer’s spouse) has not, during any of the preceding five taxable years—
(1) Failed to file any income tax return;
(2) Failed to pay any required income tax; or
(3) Entered into an installment agreement for the payment of any income tax;
(C) The Commissioner determines that the taxpayer is financially unable to pay the liability in full when due (and the taxpayer submits any information the Commissioner requires to make that determination);
(D) The installment agreement requires full payment of the liability within three years; and
(E) The taxpayer agrees to comply with the provisions of the Internal Revenue Code for the period the agreement is in effect.
(2) Form of installment agreements. An installment agreement must be in writing. A written installment agreement may take the form of a document signed by the taxpayer and the Commissioner or a written confirmation of an agreement entered into by the taxpayer and the Commissioner that is mailed or personally delivered to the taxpayer.
(3) Terms of installment agreements. (i) Except as otherwise provided in this section, an installment agreement is effective from the date the IRS notifies the taxpayer or the taxpayer’s representative of its acceptance until the date the agreement ends by its terms or until it is superseded by a new installment agreement.
(ii) By its terms, an installment agreement may end upon the expiration of the period of limitations on collection in section 6502 and §301.6502-1, or at some prior date.
(iii) As a condition to entering into an installment agreement with a taxpayer, the Commissioner may require that—
(A) The taxpayer agree to a reasonable extension of the period of limitations on collection; and
(B) The agreement contain terms that protect the interests of the Government.
(iv) Except as otherwise provided in an installment agreement, all payments made under the installment agreement will be applied in the best interests of the Government.
(v) While an installment agreement is in effect, the Commissioner may request, and the taxpayer must provide, a financial condition update at any time.
(vi) At any time after entering into an installment agreement, the Commissioner and the taxpayer may agree to modify or terminate an installment agreement or may agree to a new installment agreement that supersedes the existing agreement.
(d) Rejection of a proposed installment agreement—(1) When a proposed installment agreement becomes rejected. A proposed installment agreement has not been rejected until the IRS notifies the taxpayer or the taxpayer’s representative of the rejection, the reason(s) for rejection, and the right to an appeal.
(2) Independent administrative review. The IRS may not notify a taxpayer or taxpayer’s representative of the rejection of an installment agreement until an independent administrative review of the proposed rejection is completed.
(3) Appeal of rejection of a proposed installment agreement. The taxpayer may administratively appeal a rejection of a proposed installment agreement to the IRS Office of Appeals (Appeals) if, within the 30-day period commencing the day after the taxpayer is notified of the rejection, the taxpayer requests an appeal in the manner provided by the Commissioner.
(e) Modification or termination of installment agreements by the Internal Revenue Service—(1) Inadequate information or jeopardy. The Commissioner may terminate an installment agreement if the Commissioner determines that—
(i) Information which was provided to the IRS by the taxpayer or the taxpayer’s representative in connection with either the granting of the installment agreement or a request for a financial update was inaccurate or incomplete in any material respect; or
(ii) Collection of any liability to which the installment agreement applies is in jeopardy.
(2) Change in financial condition, failure to timely pay an installment or another Federal tax liability, or failure to provide requested financial information. The Commissioner may modify or terminate an installment agreement if—
(i) The Commissioner determines that the financial condition of a taxpayer that is party to the agreement has significantly changed; or
(ii) A taxpayer that is party to the installment agreement fails to—
(A) Timely pay an installment in accordance with the terms of the installment agreement;
(B) Pay any other Federal tax liability when the liability becomes due; or
(C) Provide a financial condition update requested by the Commissioner.
(3) Request by taxpayer. Upon request by a taxpayer that is a party to the installment agreement, the Commissioner may terminate or modify the terms of an installment agreement if the Commissioner determines that the financial condition of the taxpayer has significantly changed. The taxpayer’s request will not suspend the statute of limitations under section 6502 for collection of any liability. While the Commissioner is considering the request, the taxpayer shall comply with the terms of the existing installment agreement.
(4) Notice. Unless the Commissioner determines that collection of the tax is in jeopardy, the Commissioner will notify the taxpayer in writing at least 30 days prior to modifying or terminating an installment agreement pursuant to paragraph (e)(1) or (2) of this section. The notice provided pursuant to this section must briefly describe the reason for the intended modification or termination. Upon receiving notice, the taxpayer may provide information showing that the reason for the proposed modification or termination is incorrect.
(5) Appeal of modification or termination of an installment agreement. The taxpayer may administratively appeal the modification or termination of an installment agreement to Appeals if, following issuance of the notice required by paragraph (e)(4) of this section and prior to the expiration of the 30-day period commencing the day after the modification or termination is to take effect, the taxpayer requests an appeal in the manner provided by the Commissioner.
(f) Effect of installment agreement or pending installment agreement on collection activity—(1) In general. No levy may be made to collect a tax liability that is the subject of an installment agreement during the period that a proposed installment agreement is pending with the IRS, for 30 days immediately following the rejection of a proposed installment agreement, during the period that an installment agreement is in effect, and for 30 days immediately following the termination of an installment agreement. If, prior to the expiration of the 30-day period following the rejection or termination of an installment agreement, the taxpayer appeals the rejection or termination decision, no levy may be made while the rejection or termination is being considered by Appeals. This section will not prohibit levy to collect the liability of any person other than the person or persons named in the installment agreement.
(2) Exceptions. Paragraph (f)(1) of this section shall not prohibit levy if the taxpayer files a written notice with the IRS that waives the restriction on levy imposed by this section, the IRS determines that the proposed installment agreement was submitted solely to delay collection, or the IRS determines that collection of the tax to which the installment agreement or proposed installment agreement relates is in jeopardy.
(3) Other actions by the IRS while levy is prohibited—(i) In general. The IRS may take actions other than levy to protect the interests of the Government with regard to the liability identified in an installment agreement or proposed installment agreement. Those actions include, for example—
(A) Crediting an overpayment against the liability pursuant to section 6402;
(B) Filing or refiling notices of Federal tax lien; and
(C) Taking action to collect from any person who is not named in the installment agreement or proposed installment agreement but who is liable for the tax to which the installment agreement relates.
(ii) Proceedings in court. Except as otherwise provided in this paragraph (f)(3)(ii), the IRS will not refer a case to the Department of Justice for the commencement of a proceeding in court, against a person named in an installment agreement or proposed installment agreement, if levy to collect the liability is prohibited by paragraph (f)(1) of this section. Without regard to whether a person is named in an installment agreement or proposed installment agreement, however, the IRS may authorize the Department of Justice to file a counterclaim or third-party complaint in a refund action or to join that person in any other proceeding in which liability for the tax that is the subject of the installment agreement or proposed installment agreement may be established or disputed, including a suit against the United States under 28 U.S.C. 2410. In addition, the United States may file a claim in any bankruptcy proceeding or insolvency action brought by or against such person. If a person named in an installment agreement is joined in a proceeding, the United States obtains a judgment against that person, and the case is referred back to the IRS for collection, collection will continue to occur pursuant to the terms of the installment agreement. Notwithstanding the installment agreement, any claim or suit permitted will be for the full amount of the liabilities owed.
(g) Suspension of the statute of limitations on collection. The statute of limitations under section 6502 for collection of any liability shall be suspended during the period that a proposed installment agreement relating to that liability is pending with the IRS, for 30 days immediately following the rejection of a proposed installment agreement, and for 30 days immediately following the termination of an installment agreement. If, within the 30 days following the rejection or termination of an installment agreement, the taxpayer files an appeal with Appeals, the statute of limitations for collection shall be suspended while the rejection or termination is being considered by Appeals. The statute of limitations for collection shall continue to run if an exception under paragraph (f)(2) of this section applies and levy is not prohibited with respect to the taxpayer.
(h) Annual statement. The Commissioner shall provide each taxpayer who is party to an installment agreement under this section with an annual statement setting forth the initial balance owed at the beginning of the year, the payments made during the year, and the remaining balance as of the end of the year.
(i) Biennial review of partial payment installment agreements. The Commissioner shall perform a review of the taxpayer’s financial condition in the case of a partial payment installment agreement at least once every two years. The purpose of this review is to determine whether the taxpayer’s financial condition has significantly changed so as to warrant an increase in the value of the payments being made or termination of the agreement.
(j) 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. For special rules regarding the computation of the failure to pay penalty while certain installment agreements are in effect, see section 6651(h) and §301.6651-1(a)(4).
(k) Effective/applicability date. This section is applicable on November 25, 2009.
Par. 4. Section 301.6331-4, paragraph (d) is revised and paragraph (e) is added


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Offer in Compromise



An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer's tax liabilities for less than the full amount owed. If the liabilities can be fully paid through an installment agreement or other means, the taxpayer will in most cases not be eligible for an OIC. For information concerning tax payment options, including installment agreements, refer to Tax Topic 202.
In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (the RCP). The RCP is how the IRS measures the taxpayer's ability to pay. The RCP includes the value that can be realized from the taxpayer's assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.
The IRS may accept an OIC based on three grounds. First, acceptance is permitted if there is doubt as to liability. This ground is only met when genuine doubt exists that the IRS has correctly determined the amount owed. Second, acceptance is permitted if there is doubt that the amount owed is collectible. This means that doubt exists in any case where the taxpayer's assets and income are less than the full amount of the tax liability. Third, acceptance is permitted based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
When submitting an OIC, based on doubt as to collectibility or based on effective tax administration taxpayers must use the most current version of Form 656Offer in Compromise, and must also submit Form 433-ACollection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-BCollection Information Statement for Businesses. A taxpayer submitting an OIC based on doubt as to liability must file a Form 656-LOffer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A and/or Form 433-B.
In general, a taxpayer must submit a $150 application fee with the Form 656. There are two exceptions to this requirement. First, no application fee is required if the OIC is based on doubt as to liability. Second, the fee is not required if the taxpayer is an individual (not a corporation, partnership, or other entity) who qualifies for the low-income exception. This exception applies if the taxpayer's total monthly income falls at or below 250 percent of the poverty guidelines published by the Department of Health and Human Services. Section 4 of Form 656 contains the Low Income Certification guidelines to assist taxpayers in determining whether they qualify for the low-income exception. A taxpayer who claims the low-income exception must complete section 4 of Form 656.
Taxpayers may choose to pay the offer amount in a lump sum or in installment payments. The tax law provides rules for "lump sum offers" and "periodic payment offers" submitted on or after July 16, 2006. A lump sum offer is defined as an offer payable in 5 or fewer installments. If a taxpayer submits a lump sum offer, the taxpayer must include with the Form 656 a nonrefundable payment equal to 20 percent of the offer amount. This payment is required in addition to the $150 application fee. The 20 percent amount is called "nonrefundable" because it cannot be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without acceptance. The 20 percent amount will be applied to the taxpayer's tax liability. The taxpayer has a right to specify the particular tax liability to which the IRS will apply the 20 percent amount.
The offer is called a "periodic payment offer" under the tax law if it is payable in 6 or more installments. When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with the Form 656. This payment is required in addition to the $150 application fee. This amount is nonrefundable, just like the 20 percent payment required for a lump sum offer. Also, while the IRS is evaluating a periodic payment offer, the taxpayer must continue to make the installment payments provided for under the terms of the offer. These amounts are also nonrefundable. These amounts are applied to the tax liabilities and the taxpayer has a right to specify the particular tax liabilities to which the periodic payments will be applied.
Ordinarily, the statutory time within which the IRS may engage in collection activities is suspended during the period that the OIC is under consideration and is further suspended if the OIC is rejected by the IRS and the taxpayer appeals the rejection to the IRS Office of Appeals within 30 days from the date of the notice of rejection.
If the IRS accepts the taxpayer's offer, the IRS expects that the taxpayer will have no further delinquencies and will fully comply with the tax laws. If the taxpayer does not abide by all the terms and conditions of the OIC, the IRS may determine that the OIC is in default. To avoid a default, the taxpayer must timely file all tax returns and timely pay all taxes for 5 years or until the offered amount is paid in full, whichever period is longer. When an OIC is declared to be in default, the agreement is no longer in effect and the IRS may then collect the amounts originally owed, plus interest and penalties.
If the IRS rejects an OIC, then the taxpayer will be notified by mail. The letter will explain the reason that the IRS rejected the offer and will provide detailed instructions on how the taxpayer may appeal the decision to the IRS Office of Appeals. The appeal must be made within 30 days from the date of the letter. In some cases, an OIC is returned to the taxpayer, rather than rejected, because the taxpayer has not submitted necessary information, has filed for bankruptcy, has failed to include a required application fee or nonrefundable payment with the offer, or has failed to file tax returns or pay current tax liabilities while the offer is under consideration. A return is different from a rejection because there is no right to appeal the IRS's decision to return the offer.
Additional information about the offer in compromise program can be found on Form 656,Offer in Compromise, and in Publication 594The IRS Collection Process, or by visiting the www.irs.gov Offers in Compromise web page.




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Thursday, August 30, 2012

Family and Business Tax Cut Certainty Act of 2012


On August 28, the Senate Finance Committee released the legislative text of the Family and Business Tax Cut Certainty Act of 2012, and its committee report. The bill was favorably reported out of committee on August 2 by a vote of 19 to 5.
The bipartisan bill would extend many, but not all, of the tax cut provisions that have expired or will expire at the end of 2012, but there is no expectation of quick Congressional action. It's likely that the extenders issue won't be settled until after the election.
As passed by the Senate Finance Committee, the bill would give numerous expired provisions another lease on life.
Extended business tax breaks. The business tax breaks that would be retroactively reinstated for all of 2012 and extended through 2013 include:
... The Code Sec. 41 research credit.
... The Code Sec. 45D new markets tax credit.
... The Code Sec. 45P credit for employers who make differential wage payments to activated military reservists.
... The Code Sec. 51 work opportunity tax credit.
... The 15-year writeoff under Code Sec. 168(e) for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.
... More generous dollar limits for expensing under Code Sec. 179 ($500,000 maximum expensing and $2,000,000 phaseout threshold). The bill also would allow up to $250,000 of qualified real property to be treated as eligible for expensing, if placed in service in a tax year beginning in 2012 or 2013. Additionally, for tax years beginning in 2013, certain off-the-shelf software would continue to be expensing eligible.
... The enhanced charitable deduction under Code Sec. 170 for contributions of food inventory.
... The special expensing rules for film and TV productions under Code Sec. 181, and the 7-year recovery period under Code Sec. 168(e)(3)(C)(ii) for motorsports entertainment complexes.
... The Code Sec. 953 and Code Sec. 954 exceptions under Subpart F for active financing income.
... The 100% exclusion under Code Sec. 1202 for gain on the sale of qualified small business stock (extension would apply for such stock acquired before Jan. 1, 2014, and held for more than five years).
... The look-thru treatment of payments between related controlled foreign corporations under the Code Sec. 954(c)(6) foreign personal holding company rules.
... The rule allowing the Code Sec. 199 domestic production activity deduction for businesses in Puerto Rico.
Extended tax breaks for individuals. The bill would put in place a two-year patch (through 2013) for the alternative minimum tax (AMT), i.e., higher exemption amounts, and the ability to use nonrefundable personal credits to offset regular and AMT tax liability.
In addition, the bill would retroactively reinstate for 2012 and extend through 2013 a number of tax breaks for individuals, including:
... Parity for mass transit and parking benefits under Code Sec. 132 through Dec. 31, 2013. Thus, for 2012, the monthly limit on the exclusion for combined transit pass and vanpool benefits would be $240 (rather than current law's $125 per month). For the extension to be effective retroactive to Jan. 1, 2012, expenses incurred prior to enactment by an employee for employer-provided vanpool and transit benefits could be reimbursed by employers on a tax-free basis to the extent they exceed $125 per month and are less than $240 per month, but only to the extent that such amount has not already been excluded from the employee's taxable compensation.
... The above-the-line deduction under Code Sec. 62(a)(2)(D) for elementary and secondary school teachers.
... The ability to treat mortgage insurance premiums as qualified residence interest under Code Sec. 163.
... The election under Code Sec. 164 to deduct state and local sales taxes instead of state and local income taxes.
... The deduction under Code Sec. 222 for qualified tuition and related expenses.
... The option under Code Sec. 408 for taxpayers age 70 1/2 and older to make tax-free distributions from their IRAs for charitable contributions.
The exclusion under Code Sec. 108 for discharged debt on principal residences would be extended for one year (through 2013).
The bill also would extend for two years a number of energy-related provisions, such as the Code Sec. 25C credit for nonbusiness energy property and the Code Sec. 45L credit for new energy-efficient homes.
Tax breaks that wouldn't make the cut. For now, at least, the bill doesn't extend 100% bonus first-year depreciation (but under current law, 50% bonus first-year depreciation remains in place generally for new eligible assets bought before 2013). The bill also doesn't extend the following provisions: the payroll tax break currently in effect; expensing for cleaning up certain hazardous brownfield sites; a number of tax incentives for the District of Columbia and the Gulf Opportunity (GO) Zone; or the more-generous deduction limits for charitable contributions of computer inventory and book inventory.
As of now, there are no offsets for the cost of the bill (the two-year AMT patch alone would cost more than $132 billion).




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Wednesday, August 29, 2012

how to do an offer in compromise Form 656



The IRS or Internal Revenue Service launched the Offer in Compromise program for the best interest of the government and the taxpayer. It supports voluntary agreement with potential tax payments and filing necessities. If you owe taxes that you won’t be able to pay either in a single disbursement or in installments, see if you qualify for an Offer in Compromise that lowers the overall tax amount and makes settlement possible. In case you owe taxes to the IRS, you could consider settling your entire tax debt for less than the sum you owe. The official practice of lessening your tax debt is known as an Offer in Compromise. Your Offer in Compromise will be analyzed by the IRS in accordance with its verification of your “reasonable collection potential.” If you can prove that the government will not collect any cash from you otherwise, your offer might be accepted by the IRS.
An Offer in Compromise is a means to resolve due federal income taxes. With the OIC process, you’ll be able to make an offer of either a short-time or lump sum disbursement plan to solve tax issues. Clearly, the IRS is usually reluctant to allow considerable discounts unless you are really incapable of paying your total debt.
First of all, decide why the IRS must acknowledge your OIC. The very first reason would be a “doubt as to collectibility”; this refers to a state where the IRS won’t be able to collect the unpaid tax under any rational situation. The next reason would a “doubt as to liability”; here you may hold fresh information indicating that you do not owe the tax. The final reason is of “effective tax administration”; here you owe the tax and have the option of paying it but suppose that for some special reason you might not have to.
Now collect every single detail concerning your unpaid tax bill. The simplest and best way to execute this is to request the IRS for a recent statement, which it is required to give.
Arrange a proper means to fund your settlement offer. If you are planning to make a payment offer of $20,000 in taxes, you should arrange a way of paying the $20,000, for example by obtaining a home equity loan, trading off your assets or drawing on your savings.
Settle on the kind of payment offer that you intend to make. The IRS normally acknowledges lump-sum disbursement offers and at times approves installment offers. It is up to you to decide what you can manage, considering the fact that the IRS is more prone to allow a lump sum payment offer. The phrase “lump sum” is somewhat misleading; the reason behind this is that the IRS will acknowledge a lump-sum offer including five installment payments, provided you are able to pay 20 percent of the initial offer.
Collect all the necessary credentials. Also assemble any other important documents that will help draw a clear picture of your economic circumstances, including all liabilities that you owe, assets you possess, any savings that you have, and job and income reports for the last few years, with your service and income position for the next couple of years. Check that you have the latest edition of the IRS forms you require.
Fill out the Offer in Compromise form – IRS Form 656. Just make certain that you fill out all necessary details, even though it seems boring or monotonous. You may directly give a call to the IRS or browse through the IRS website (irs.gov) to get the most recent form. Finally, pay the requisite filing fee and submit your offer in compromise form with the proper IRS office.


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Guilty Plea cannot be rescinded - tax fraud



U.S. v. BRANDVEEN, Cite as 110 AFTR 2d 2012-XXXX, 08/15/2012


UNITED STATES OF AMERICA, Plaintiff - Appellee, v. KIM JENKINS BRANDVEEN, Defendant - Appellant.

Case Information:

Code Sec(s):
Court Name:UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT,
Docket No.:No. 12-4014; No. 12-6185,
Date Decided:08/15/2012Submitted: June 28, 2012.
Disposition:

HEADNOTE

.
Reference(s):

OPINION

Vaughan C. Jones, JOHNSON & JONES, LLP, Richmond, Virginia, for Appellant. Neil H. MacBride, United States Attorney, Michael C. Moore, Assistant United States Attorney, Richmond, Virginia, for Appellee.
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT,
Appeals from the United States District Court for the Eastern District of Virginia, at Richmond. Henry E. Hudson, District Judge. (3:11-cr-00149-HEH-1)
Before SHEDD, KEENAN, and DIAZ, Circuit Judges.
Judge: PER CURIAM:
UNPUBLISHED
No. 12-4014 affirmed; No. 12-6185 dismissed by unpublished per curiam opinion.
Unpublished opinions are not binding precedent in this circuit.
Kim Jenkins Brandveen pleaded guilty pursuant to a written plea agreement to tax evasion, in violation of 26 U.S.C. § 7201 (2006). The district court sentenced Brandveen to five years' imprisonment and three years' supervised release. The district court also ordered Brandveen to pay the Internal Revenue Service $2,122,897.82 in restitution. Brandveen timely appeals the criminal judgment and the restitution order.
Brandveen challenges the district court's denial of her motion to withdraw her guilty plea and the amount of restitution ordered. For the reasons that follow, we conclude that the district court did not abuse its discretion in denying Brandveen's motion to withdraw her guilty plea, and thus we affirm the criminal judgment. And, because we agree with the Government that Brandveen's appeal of the restitution order is foreclosed by the valid appeal waiver set forth in her plea agreement, we dismiss her appeal of that order.

I.

We first consider whether the district court abused its discretion in denying Brandveen's motion to withdraw her guilty plea. Brandveen argues that her attorney, a federal public defender, employed abusive and coercive tactics to induce Brandveen to plead guilty, and thus that her guilty plea was involuntary. The district court rejected this contention after conducting a thorough hearing on the motion.
“A defendant has no absolute right to withdraw a guilty plea.” United States v. Bowman, 348 F.3d 408, 413 (4th Cir. 2003) (internal quotation marks omitted). Once the district court has accepted a defendant's guilty plea, it is within the court's discretion whether to grant a motion to withdraw it. United States v. Battle, 499 F.3d 315, 319 (4th Cir. 2007). This Court closely scrutinizes the Fed. R. Crim. P. 11 colloquy and, if properly conducted, “a strong presumption that the plea is final and binding” attaches. United States v. Nicholson, 676 F.3d 376, 384 (4th Cir. 2012) (internal quotation marks omitted).
Brandveen acknowledges that her claim of coercion is entirely inconsistent with her assertions, under oath, at the Rule 11 hearing, which are presumed to be truthful. See United States v. Lemaster, 403 F.3d 216, 221–22 (4th Cir. 2005) (explaining that, absent compelling evidence to the contrary, “the truth of sworn statements made during a Rule 11 colloquy is conclusively established”). The district court conducted a comprehensive Rule 11 hearing in this case, taking care to ensure that Brandveen was knowingly and voluntarily agreeing to plead guilty. The court offered Brandveen many opportunities to report her attorney's allegedly coercive behavior, but she did not avail herself of those chances. Although Brandveen implores us to look “beyond the spoken words of the hearing” (Appellant's Br. at 12), we will not do so as “courts must be able to rely on the defendant's statements made under oath during a properly conducted Rule 11 plea colloquy.” LeMaster, 403 F.3d at 221. We therefore presume that Brandveen's guilty plea is “valid and binding.” Nicholson, 676 F.3d at 384.
The inquiry then becomes whether Brandveen established a “fair and just” reason for withdrawing the plea. Id.; see Fed. R. Crim. P. 11(d)(2)(B). To aid in this analysis, this Court has announced a six-factor test. See United States v. Moore, 931 F.2d 245, 248 (4th Cir. 1991). Under Moore, a district court considers:
(1) whether the defendant has offered credible evidence that his plea was not knowing or not voluntary, (2) whether the defendant has credibly asserted his legal innocence, (3) whether there has been a delay between the entering of the plea and the filing of the motion, (4) whether defendant has had close assistance of competent counsel, (5) whether withdrawal will cause prejudice to the government, and (6) whether it will inconvenience the court and waste judicial resources.
Id. Although all of the Moore factors should be considered, the critical factor is whether the plea was knowing and voluntary, which again hinges on the Rule 11 colloquy. United States v. Faris, 388 F.3d 452, 456 (4th Cir. 2004), vacated on other grounds, 544 U.S. 916 (2005). We review a district court's denial of a motion to withdraw a guilty plea for abuse of discretion. United States v. Ubakanma, 215 F.3d 421, 424 (4th Cir. 2000).
We have thoroughly reviewed the record in this case, including the transcripts of the Rule 11 hearing and the hearing on Brandveen's motion to withdraw her guilty plea. We discern no abuse of discretion in the court's weighing of the Moore factors or the resulting denial of Brandveen's motion to withdraw her guilty plea. We thus affirm the criminal judgment.

II.

Brandveen next contends that the district court erroneously calculated the restitution amount by including losses outside the offense of conviction. In response, the Government asserts that Brandveen waived appellate review of the restitution order through the waiver of her right to appeal “any sentence within the statutory maximum ... on the grounds set forth in [18 U.S.C. § 3742 (2006)] or on any ground whatsoever.” (J.A. 74). * We agree.
A defendant may, in a valid plea agreement, waive the right to appeal her sentence under 18 U.S.C. § 3742. United States v. Manigan, 592 F.3d 621, 627 (4th Cir. 2010); United States v. Wiggins, 905 F.2d 51, 53 (4th Cir. 1990). This Court reviews the validity of an appellate waiver de novo, and will enforce the waiver if it is valid and the issue appealed is within the scope of the waiver. United States v. Blick, 408 F.3d 162, 168 (4th Cir. 2005).
An appeal waiver is valid if the defendant knowingly and intelligently agreed to it. Id. at 169. To determine whether a waiver is knowing and intelligent, this Court examines the background, experience, and conduct of the defendant. United States v. Broughton-Jones, 71 F.3d 1143, 1146 (4th Cir. 1995). “An appeal waiver is not knowingly or voluntarily made if the district court fails to specifically question the defendant concerning the waiver provision ... during the Rule 11 colloquy and the record indicates that the defendant did not otherwise understand the full significance of the waiver.” United States v. Johnson, 410 F.3d 137, 151 (4th Cir. 2005) (internal quotation marks omitted). Ultimately, however, the issue is “evaluated by reference to the totality of the circumstances.” United States v. General, 278 F.3d 389, 400 (4th Cir. 2002).
The totality of circumstances in this case clearly demonstrates that Brandveen validly waived her right to appeal her sentence. As previously discussed, Brandveen's guilty plea was voluntary, and there is no doubt that Brandveen knowingly agreed to plead guilty, with a full understanding of the terms of the appeal waiver. The language of the plea agreement is clear and unambiguous, and the district court questioned Brandveen to ensure that she had read and understood the plea agreement prior to signing it. The court also discussed the scope of the appeal waiver with Brandveen. We thus hold that the waiver is valid and enforceable as it was knowingly and voluntarily accepted. See Blick, 408 F.3d at 169.
The final issue, then, is whether the argument raised on appeal falls within the scope of the waiver. Brandveen acknowledges that the district court had statutory authority to order restitution, but posits that the court exceeded that authority by ordering restitution in an amount that encompassed conduct beyond the offense of conviction.
While framed in terms of the court's authority, at its core, Brandveen's argument attacks the district court's fact-based determination as to which losses should be included as part of the “offense of conviction.” Because Brandveen's challenge to what should be included in determining the loss amount does not implicate the court's statutory authority to order restitution, we hold that the asserted error squarely falls within the scope of the appeal waiver. See United States v. Cohen, 459 F.3d 490, 498–500 (4th Cir. 2006) (rejecting defendant's attempt to restrict the scope of the “offense of conviction” to those acts “specifically defined by the factual basis of his plea contained in the plea agreement” and holding that, because the restitution award was within the scope of the district court's authority, the appellate challenge to the amount of that award was within the ambit of the appeal waiver (internal quotation marks omitted)). We therefore dismiss the appeal of this issue.
For the foregoing reasons, we affirm the criminal judgment and we dismiss the appeal of the restitution order. We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before the Court and argument would not aid the decisional process.
No. 12-4014 AFFIRMED
No. 12-6185 DISMISSED

*


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