Installment Agreements
Section 6234(a) of TAMRA (P.L. 100-647) enacted Section 6159
which authorizes the IRS to enter into written agreements with any
taxpayer under which the taxpayer is allowed to pay taxes owed, as
well as interest and penalties, in installment payments if the IRS
determines that doing so will facilitate collection of the amounts
owed. An installment agreement does not reduce the amount of
taxes, interest, or penalties owed. However, it does provide
for a longer period during which payments may be made during which
other IRS enforcement actions (such as levies or seizures) are
held in abeyance.
Section 201(a) of the Taxpayer Bill of Rights 2 (P.L. 104-68)
amended Section 6159 to require the IRS to notify taxpayers 30
days before altering, modifying or terminating any installment
agreement for any reason other than the collection of tax is
determined to be in jeopardy. The IRS must include an explanation
of why it intends to take such action.
Section 3467 of the IRS Restructuring Act (P.L. 105-206) added
Section 6159(c) to require the IRS to enter into an installment
agreement if: (i) the taxpayer's liability is $10,000 or less
(excluding penalties and interest); (ii) within the five previous
years, the taxpayer has not failed to file a return or to pay tax,
nor entered into an installment agreement; (iii) the taxpayer has
submitted (if requested) financial statements to the IRS, and the
IRS determines that the taxpayer is unable to pay the tax due in
full; (iv) the installment agreement provides for full payment of
the liability within three years; and (v) the taxpayer agrees to
continue to comply with the tax laws and the terms of the
agreement for the period (up to three years) that the agreement is
in place.
In addition, Section 3506 of the IRS Restructuring Act requires
the IRS to send every taxpayer that has an
installment agreement with the IRS an annual statement of the
initial balance owed, the payments made during the year, and the
remaining balance.
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