Introduction to Collection Representation by

Transcription

1 Introduction to Collection Representation by ROBERT E. MCKENZIE ARNSTEIN & LEHR SUITE SOUTH RIVERSIDE PLAZA CHICAGO, ILLINOIS (312)

2 TABLE OF CONTENTS 1. COLLECTION IRS PROCESSING OF NOTICES OF DELINQUENT TAXES DUE... 1 Tax Collection... 1 Four-Level System... 1 Compliance Center Notice Procedure... 1 Business Taxpayers... 2 Notice of Levy... 2 Correspondence With Compliance Center... 2 Small Dollar Payment Plans... 2 Telephone Collection Efforts IRS COLLECTION PROCEDURES... 3 The Power of the IRS to Collect Taxes... 3 Lien Rights... 3 Creation of Lien... 3 Liens on All Taxpayer Property... 3 Statute of Limitations... 3 Notice of Lien... 4 Notice Five Days After Filing RRA SECTION AN OVERVIEW OF THE DUE PROCESS... 4 RRA Section 3401, Due Process in IRS Collection Actions... 4 Purpose of Section Requesting a CDP Hearing IRC SECTION 6320, NOTICE AND OPPORTUNITY FOR HEARING UPON FILING OF NOTICE OF LIEN REQUIREMENTS OF NOTICE... 4 Applicable to any Notices of Federal Tax Lien filed after January 18, i

3 Notification... 5 Right to Collection Due Process Hearing... 5 Conduct of Collection Due Process Hearings... 6 Matters Considered at Collection Due Process Hearing... 6 Judicial Review of Collection Due Process Hearing... 6 Retained Jurisdiction of IRS Office of Appeals ("Appeals")... 6 Equivalent Hearings IRC SECTION Notice and Opportunity for Hearing Before Levy... 7 Overview... 7 Requirements of Notice... 7 Notification... 8 Right to CDP Hearing EXTENSIONS OF TIME TO PAY... 8 Granting of Extensions... 8 Guaranteed Availability of Installment Agreements... 8 <$25,000 Liabilities... 8 Changes to Liens... 8 New Collection Procedures Announced... 9 More Flexible Attitude... 9 Higher Lien Thresholds Easier Lien Withdrawals Direct Debit Installment Agreements and Liens Relaxed Rules For Installment Agreements For Small Businesses Offers in Compromise New Form ii

4 IRS Revised Rules for Streamlined Installment Agreements Applying Online For a Payment Agreement The new rules for Form 9465-FS only to individuals who: Do not use Form 9465-FS if: Guaranteed installment agreement Caution How the Process Works Payment Methods Requests to Modify or Terminate An Installment Agreement Where to File IRS Offers New Penalty Relief and Expanded Installment Agreements to Taxpayers under Expanded Fresh Start Initiative Penalty Relief Income Limits New Form 1127A Failure to Pay Penalty COLLECTION INFORMATION STATEMENTS CIS's Types of Collection Information Statements Amount of Payments Allowable Expense Overview Five Year Test TAXPAYER ASSISTANCE ORDERS Right to Apply for Assistance Taxpayer Assistance Orders OFFER IN COMPROMISE Number of Offers iii

5 Securing an Offer in Compromise Future Income for Offers in Compromise Agency Notes Variety of Situations Income Averaging Addressed Facts and Circumstances Approach Directed Offer In Compromise Forms Tax Increase Prevention and Reconciliation Act of Payments With Offers Failure to Make Deposit Not Refundable Taxpayer Advocate Research Failure to Make Installment Payments Low Income Taxpayers Interim Guidance Released for Low-Income Cases Supporting Documents $150 Processing Fee Computation of Offer Amount Cash Offer Short Term Deferred Payment Offer Deferred Payment Offers Promote Effective Tax Administration Encourage Compliance Exhibits iv

6 Introduction to Collection Representation By Robert E. McKenzie COLLECTION IRS PROCESSING OF NOTICES OF DELINQUENT TAXES DUE Tax Collection 1.10 The IRS Collection Division attempts to collect delinquent taxes as inexpensively and rapidly as possible. To accomplish this task the IRS makes extensive use of computers. Only when automated methods have failed to collect a tax is the matter assigned to an individual for collection. Four-Level System 1.20 To effectuate this policy the IRS utilizes a four-level system of collection. It begins its collection efforts on each account by generating computer notices from a Regional Compliance Center. If the efforts of the Compliance Center do not secure payment, the account is then assigned to the Automated Collection System (ACS). The Automated Collection System attempts to collect the tax liability by initiating telephone calls to the taxpayer and others. During the time that an account is assigned to Compliance Center and ACS, accounts may also be resolved by Collection Support Staff assigned to handle "walk-ins" in local IRS offices. If none of these levels of the system are successful in collecting the account, it is eventually assigned to a Revenue Officer for a field investigation. Obviously, it is much less expensive for the IRS to collect a tax by mailing a notice or placing a telephone call than it is to visit the taxpayer personally. For the taxpayer, however, personal negotiation is much more effective than dealing with an automated system. Compliance Center 1.30 The IRS has ten Regional Compliance Centers which process all tax returns filed with the IRS. Compliance Centers are extensively automated. The information on each tax return filed is encoded into the IRS computer at a Compliance Center. That IRS computer system will determine if computational errors are contained on the return and issue notices regarding errors. The Compliance Center is also responsible for initiating notices to taxpayers to collect balances due on tax returns Notice Procedure 1.40 Upon receipt of a tax return or other document showing a balance due, the following process takes place in the Internal Revenue Compliance Center. Within several weeks after receipt of the document, the information is placed on the computer system. That system will then initiate a series of notices. The first notice issued is a document titled "Request for Payment, which informs the taxpayer that there is a balance due on the return, states the amount of tax, interest and penalties due, and requests payment within ten days. This is the notice statutorily required for the creation of a valid Federal Tax Lien. If the liability is for individual income taxes, and the liability is relatively small, the taxpayer will normally receive four subsequent notices before the IRS proceeds to take any administrative collection measures. If the liability is not paid 1

7 after the initial notice, the taxpayer will receive a second notice, Reminder, Notice 501. The IRS will issue Notice 503, "Urgent, Immediate action is required ", five weeks after the first notice. The taxpayer will receive Notice 504, "Urgent, We intend to levy on certain assets. Please respond NOW." in the mail five weeks after issuance of Notice 503 if payment is not made after that notice. Notice 504 is the nastiest of the IRS letters. If the taxpayer fails to pay after Notice 504 the matter will be referred for collection by the Automated Collection System (ACS). If ACS is unsuccessful in collecting or resolving the matter the IRS will then issue Letter 1058, FINAL NOTICE, NOTICE OF INTENT TO LEVY AND NOTICE OF YOUR RIGHT TO A HEARING. PLEASE RESPOND IMMEDIATELY. If the taxpayer exercises her appeal rights, collection will be held. If the taxpayer fails to appeal the IRS will levy after expiration of 30 days from the notice. One unusual convention of the IRS is that each notice will bear a date which falls on Monday. Business Taxpayers 1.50 In the case of business taxes (either corporate income or withholding taxes), the IRS will send three notices period prior to initiating enforcement measures. The total time from first notice to enforcement action is normally at least 16 weeks. The taxpayer will receive a first notice and a Notice 504 five weeks subsequent to the first notice. The account will then be referred to ACS or a Revenue Officer for issuance of Letter 1058 if the taxpayer fails to resolve the liability. Notice of Levy 1.60 ACS has computerized sources of income or assets of the taxpayer, such as wages, bank accounts, certificates of deposit or accounts receivable, all of which can be seized administratively from the taxpayer, it will issue a Notice of Levy against the taxpayer's assets approximately six weeks after the Letter If the ACS does not have sources of income or other assets to levy upon, it will either research other sources or issue a Balance Due (Bal Due) to a local area office for collection, several weeks subsequent to the final notice. Correspondence With Compliance Center 1.70 Normally, it is ineffective to write to a Compliance Center. It may take some Compliance Center six weeks or more to process correspondence. For example, if your client receives a Notice 504 even though he paid the tax upon receipt of the Notice 503, a letter to the IRS will not stop assignment to ACS. The IRS will not process your letter for six weeks, yet the computer continues to automatically refer the matter to ACS on a set cycle. Small Dollar Payment Plans 1.80 A taxpayer may be able to secure a 60-month payment plan for 1040 liabilities of less than $25,000. The IRS Restructuring and Reform Act of 1998 requires the IRS to grant a payment plan to individual taxpayers who owe less than $10 thousand. Telephone Collection Efforts 1.90 If an account cannot be collected by a Returns Processing Center by using notices a upon the taxpayer's wages or bank account, the matter will then be transferred 2

8 to a ACS for telephone collection efforts. Each ACS, including the Return Processing Center, has a computerized telephone collection system. The IRS has twenty-three ACS sites. 2. IRS COLLECTION PROCEDURES The Power of the IRS to Collect Taxes 2.10 The IRS has the power to collect taxes by levying on taxpayers property as a result of the Federal Tax Lien. When a person owes taxes, the IRS gains a lien on all that person's assets after meeting certain statutory requirements. The lien attaches to all rights, title and interest of the taxpayer wherever it may be situated. [IRC 6321] Once the IRS has a lien on all of a taxpayer's assets, it may enforce that lien by administratively levying his or her assets. Lien Rights 2.20 An example of lien rights would be the lien created when a person buys a car and finances the purchase through a bank. If the buyer defaults on the note, the bank may repossess the car. In the case of the IRS it gains a lien on all of a taxpayer's assets and therefore it has the right to seize most of those assets to satisfy unpaid taxes. Creation of Lien 2.30 The liability of a taxpayer for Internal Revenue taxes is personal in nature and, does not directly attach to his or her property. In this respect the liability is analogous to a simple debt and, without anything more, could be enforced only by a court action. The lien is often referred to as the "statutory" or the "general" lien. The following requirements for establishing the lien are contained in the Code: An assessment must have been made; A notice and demand for payment must have been made (the first IRS notice meets this requirement); and The taxpayer must have neglected or refused to pay. [IRC 6321] Liens on All Taxpayer Property 2.40 The effect of the Federal Tax Lien statute is that when any person fails to pay any assessment of tax, plus interest, penalties, or costs, a lien in favor of the United States arises upon all property and rights to property, whether real or personal, tangible or intangible, belonging to the taxpayer. Statute of Limitations 2.50 Prior to 1990 the Statute of Limitations for collection was six years from the date of assessment plus such suspended, extended or postponed period of time as may, by law, be applicable. [IRC 6502] The Revenue Reconciliation Act of 1990 extended the Statute of Limitations for collection to ten years. [Revenue Reconciliation Act of 1990, 1131(a)] This period was extended for all tax liabilities upon which the Statute of Limitations was still open at the time the bill was passed by Congress. 3

9 Notice of Lien 2.60 IRC 6323(a) modifies IRC 6321 by providing that the Federal Tax Lien is not valid against purchasers, holders of security interests, mechanics lienors, and judgment lien creditors until a Notice of Lien has been filed. The filing of the Notice of Lien is constructive notice to these persons that the lien, provided for by the Code, exists. Notice Five Days After Filing 2.70 The RRA 1998 established formal procedures designed to ensure due process where the IRS seeks to impose a lien. The due process procedures apply after notice of a Federal tax lien has been filed. The IRS is required to notify the taxpayer of the filing a Notice of Lien within five days of its filing. During the 30-day period beginning with the mailing or delivery of this notification, the taxpayer may demand a hearing before an appeals officer. [Act 3401; IRC 6320] 3. RRA SECTION AN OVERVIEW OF THE DUE PROCESS RRA Section 3401, Due Process in IRS Collection Actions 3.10 Provides the taxpayer with procedural rights when the Service files a Notice of Federal Tax Lien (NFTL) and when it intends to levy upon the taxpayer's property or right to property Purpose of Section The purpose of section 6320 is to provide a taxpayer with notification that a Notice of Federal Tax Lien has been filed and to provide the taxpayer with the opportunity to request a Collection Due Process hearing ("CDP hearing") with the IRS Office of Appeals ("Appeals") with respect to the tax liability for the taxable period or periods to which the lien relates. Requesting a CDP Hearing 3.30 If the taxpayer timely requests a CDP hearing, Appeals will consider the case and render a written determination concerning the appropriateness of the lien filing or proposed levy. Through this section, the taxpayer may have the opportunity to challenge administratively and in court the taxpayer's liability for the tax years stated on the NFTL or levy, raise any additional defenses with respect to that liability, challenge the appropriateness of the filing of the NFTL or proposed levy, and offer collection alternatives. The taxpayer is required to raise all relevant substantive and collection issues at that hearing. 4. IRC SECTION 6320, NOTICE AND OPPORTUNITY FOR HEARING UPON FILING OF NOTICE OF LIEN REQUIREMENTS OF NOTICE Applicable to any Notices of Federal Tax Lien filed after January 18, A taxpayer is entitled to notice of the filing of an NFTL not more than five business days after the date of any filing. 4

10 This notice describes the taxpayer's right to request a Collection Due Process hearing with respect to any taxable periods described on the NFTL, within the 30-calendar day period beginning on the day after the 5-day period for notification has expired. The taxpayer is entitled to only one CDP hearing with respect to each taxable period to which the unpaid tax relates. The determination made by Appeals may be appealed to either the United States Tax Court ("Tax Court"). The running of the periods of limitations for collection after assessment, for criminal prosecutions, and for suits described under IRC 6532 are suspended for the periods in which the CDP hearing and any appeals are pending. (Suspensions will be more specifically addressed below). If a taxpayer does not request a CDP hearing within the 30-day period, a taxpayer can still request a hearing at a later date and the IRS will provide a hearing equivalent to a CDP hearing. However, the taxpayer will not be entitled to judicial review of that later hearing. ("Equivalent hearings" are more specifically addressed below). Notification 4.20 Written notification that an NFTL has been filed must be given to the taxpayer in person, or left at the taxpayer's dwelling or usual place of business, or sent by certified or registered mail to the taxpayer's last known address, not more than five days after the date of filing of the NFTL. Right to Collection Due Process Hearing 4.30 A taxpayer to whom IRS has properly delivered or mailed notice of the CDP hearing is entitled to a CDP hearing if requested within the 30-calendar day period following the five business day period within which the IRS is required to give that notice. A taxpayer's request for a CDP hearing must be in writing. A Form has been developed for this purpose. The request must set forth the taxpayer's name, address, daytime phone number, type of tax, taxable period, taxpayer's TIN, a statement that the taxpayer requests a CDP hearing concerning the NFTL and the reasons the taxpayer disagrees with the NFTL filing. The request must be signed and dated by the taxpayer or the taxpayer's representative. The location for sending the request for a CDP hearing is the office of the IRS that issued the CDP notice. 5

11 Conduct of Collection Due Process Hearings 4.40 The taxpayer is entitled to one CDP hearing with respect to each unpaid taxable period shown on an NFTL filed after January 18, To the extent possible, all CDP hearings under section 6320 and 6330 (which will be further addressed below) will be combined. The CDP hearing must be before an employee or officer of Appeals who has had no prior involvement with respect to the taxable period or periods. Matters Considered at Collection Due Process Hearing 4.50 Appeals Division has the authority to determine the validity, sufficiency, and timeliness of any CDP hearing notice or request for a hearing by the taxpayer. At the CDP hearing, the hearing officer is required to obtain verification from IRS Collection that the requirements of any applicable law or procedure have been met. At the CDP hearing, the taxpayer is entitled to raise any relevant issue relating to the unpaid tax, including any appropriate spousal defenses, challenges to the appropriateness of the NFTL filing, offers of collection alternatives, and merits of liability, if appropriate. The taxpayer must raise all relevant issues in the CDP hearing. The rule of variance that applies in refund litigation will apply here. Judicial Review of Collection Due Process Hearing 4.60 The taxpayer may appeal the determination made in the CDP hearing within 30 calendar days to the Tax Court. The taxpayer is precluded from raising "new issues" upon judicial review. In other words, the taxpayer cannot raise any issues for the first time upon judicial review, but is required to raise all relevant issues in the CDP hearing. The court will review Appeals' determination concerning the validity of the tax liability on a de novo basis. (This includes determinations concerning spousal defenses.) Appeals' determination concerning any other matters will be reviewed using an abuse of discretion standard of review. Retained Jurisdiction of IRS Office of Appeals ("Appeals") 4.70 The Appeals office that makes the determination at a CDP hearing retains jurisdiction over that determination, including any subsequent hearings and collection actions taken with respect to that determination. 6

12 Equivalent Hearings 4.80 Taxpayers who fail to timely request a CDP hearing may later request an "equivalent hearing" with Appeals concerning the NFTL and tax liabilities for the tax periods shown on that NFTL. The appeal must be filed within 1 year of the original CDP notice. 5. IRC SECTION 6330 Notice and Opportunity for Hearing Before Levy 5.10 The focus of this section will be on the distinctions of the section 6330 CDP hearing from the section 6320 CDP hearing just discussed. Many of the issues discussed above are equally applicable under section 6330-i.e., the issues which can be raised at a CDP hearing, contents of notice, opportunities for judicial review, retained jurisdiction of Appeals, "equivalent hearings, etc. Operational/conceptual distinctions between 6320 and 6330: IRC 6320's key date is the date the NFTL is filed. 6330's key date is the date of the CDP hearing notice (FINAL NOTICE) Overview 5.20 Notice is given of a right to a CDP hearing at least 30 days prior to levy on property or rights to property, other than a State tax refund, in non-jeopardy situations. CDP hearing is with respect to the tax liability for the taxable period or periods for which the levy is intended to be made. Requirements of Notice 5.30 As with the section 6320 notice, a person whose property or rights to property may be levied upon must be given notice of his or her rights to a CDP hearing. These requirements do NOT apply in the case of jeopardy levies and levies on State tax refunds. This notice must be given not less than 30 days prior to the date of the first levy with respect to the unpaid tax liability for the taxable period for which the levy may be made. The taxpayer must request the section 6330 hearing within the 30-day period from the date of the CDP hearing notice, or will lose the right to a CDP hearing, court review, and retained jurisdiction of Appeals. 7

13 Notification 5.40 Notice is generally given in the same manner as for section 6320 notice, EXCEPT that where notice is sent by certified or registered mail, it must be sent return receipt requested. Right to CDP Hearing 5.50 Must be requested within 30-day period. 6. EXTENSIONS OF TIME TO PAY Granting of Extensions 6.10 Extensions of time to pay provide a specific date by which full payment of taxes is expected. Extensions may be granted for up to120 days for all taxpayers. Extensions of time to pay are not installment agreements and do not provide for periodic payments. No forms are required. Form 433-D is not be used. The IRS will not file a lien. The IRS will not issue Notices of Intent to Levy, Notice of Hearing (LT 11 or Letter 1058DO) nor levies during granted extension periods, unless collection is in jeopardy or at risk. NOTE: This applies even if taxpayers are given deadlines within the extension period and these deadlines are not met. EXAMPLE: A revenue officer gives the taxpayer a 60 day extension of time to pay and 30 days to have all federal tax deposits current. The taxpayer has not made all the current tax deposits by the 31st day. Enforcement is not appropriate until after 60 days pass, unless collection is in jeopardy or at risk. [IRM ] Guaranteed Availability of Installment Agreements 6.20 The Internal Revenue Service Restructuring and Reform Act of 1998 requires the Secretary to grant an installment agreement, at the taxpayer's option, if: the liability is $10,000, or less (excluding penalties and interest); within the previous 5 years, the taxpayer has not failed to file or to pay, nor entered an installment agreement under this provision; [Act 3467; IRC 6159) <$25,000 Liabilities 6.30 The IRS has chosen to create a more liberal system that allows installment agreements of up to 5 years for balances of less than $25,000. Changes to Liens 6.40 The IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid 8

14 assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios: Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement. The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement. The IRS will also withdraw liens on existing Direct Debit Installment Agreements upon taxpayer request. Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored. Taxpayers can use the Online Payment Agreement application on IRS.gov to set-up with Direct Debit Installment Agreements. New Collection Procedures Announced 6.50 On February 24, 2011 IRS announced its Fresh Start initiative of new policies and programs to help taxpayers pay back taxes and avoid tax liens. IRS's stated goal is to help individuals and small businesses meet their tax obligations, without adding an unnecessary burden to taxpayers. Over the past several years as taxpayers have endured the Great Recession the IRS has escalated the number of federal tax liens filed against delinquent taxpayers. The IRS aggressive use of liens has been criticized by the National Taxpayer Advocate in her annual report to congress and the IRS Advisory Council in its annual report to the Commissioner. More Flexible Attitude 6.60 The newly announced policy represents a new, more flexible attitude by the IRS. The IRS making important changes to its lien filing practices that will lessen the negative impact on taxpayers. The changes include: Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens. Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill. Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement. Creating easier access to Installment Agreements for more struggling small businesses. Expanding a streamlined Offer in Compromise program to cover more taxpayers. 9

15 Higher Lien Thresholds 6.70 The IRS stated that it will significantly increase the dollar thresholds when liens are generally filed. The new dollar amount is in keeping with inflationary changes since the number was last revised. Currently, liens are automatically filed at certain dollar levels for people with past-due balances. The IRS did not publicly disclose the new lien thresholds. The IRS plans to review the results and impact of the lien threshold change in about a year. Easier Lien Withdrawals 6.80 The IRS will also modify procedures that will make it easier for taxpayers to obtain lien withdrawals. Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. The IRS has determined that this approach is in the best interest of the government. In order to speed the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens. Direct Debit Installment Agreements and Liens 6.90 The IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios: Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement. The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement. The IRS will also withdraw liens on existing Direct Debit Installment Agreements upon taxpayer request. Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored. Taxpayers can use the Online Payment Agreement application on IRS.gov to set-up with Direct Debit Installment Agreements. Relaxed Rules For Installment Agreements For Small Businesses The IRS will also make streamlined Installment Agreements available to more small businesses. The payment program will raise the dollar limit to allow additional small businesses to participate. Small businesses with $25,000 or less in unpaid tax can participate. Currently, only small businesses with under $10,000 in liabilities can participate. Small businesses will have 24 months to pay. The streamlined Installment Agreements will be available for small businesses that file either as an individual or as a business. Small businesses with an unpaid assessment balance greater than $25,000 would qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less. 10

16 Offers in Compromise The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers. This streamlined OIC is being expanded to allow taxpayers with annual incomes up to $100,000 to participate. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less. OICs are subject to acceptance based on legal requirements. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer s income and assets to make a determination regarding the taxpayer s ability to pay. New Form In March, 2011 the IRS issued a new Form for collection due process appeals. It is formatted to assist taxpayers with determining defenses to IRS enforced collection measures. IRS Revised Rules for Streamlined Installment Agreements In January 2012 ihe RS relaxed its rules for payment of smaller tax liabilities. The revised procedures now allow taxpayers up to 72 months to pay their tax obligations. The new procedures also increase the maximum amount subject to the relaxed streamlined agreements from $25,000 to $50,000. You may request a monthly installment plan by submitting Form 9465-FS to if your liability is greater than $25,000 but not more than $50,000. Though Form 9465-FS is meant to be used by taxpayers with liabilities greater than $25,000 but not more than $50,000, it can be used by all taxpayers to request an installment agreement. Generally, you can have up to 72 months to pay. In certain circumstances, you can have longer to pay or your agreement can be approved for an amount that is less than the amount of tax you owe. If you use 9465-FS you must file it on paper mailing it to the address shown below for your respective address.. If you have already filed your return and you are sending in Form 9465-FS on its own, mail it to the address shown below for the type of return filed. However, before requesting an installment agreement, you should consider other less costly alternatives, such as getting a bank loan or using available credit on a credit card. Applying Online For a Payment Agreement If your balance due is not more than $50,000, you can also apply online for a payment agreement instead of filing Form 9465-FS. To do that, go to IRS.gov and click on More... under Tools. The new rules for Form 9465-FS only to individuals who: Who owes income tax on Form 1040, Who may be responsible for a Trust Fund Recovery Penalty, 11

17 Who was self-employed and owes self-employment or unemployment taxes and is no longer operating the business, Who is personally responsible for a partnership liability and the partnership is no longer operating, or Owner who is personally responsible for taxes in the name of a limited liability company (LLC) and the LLC is no longer operating. Do not use Form 9465-FS if: You can pay the full amount you owe within 120. If you can pay the full amount you owe within 120 days, call to establish your request to pay in full. If you can do this, you can avoid paying the fee to set up an installment agreement. Instead of calling, you can apply online. You want to request an online payment agreement Guaranteed installment agreement Your request for an installment agreement cannot be turned down if the tax you owe is not more than $10,000 and all three of the following apply. During the past 5 tax years, you (and your spouse if filing a joint return) have timely filed all income tax returns and paid any income tax due, and have not entered into an installment agreement for payment of income tax. The IRS determines that you cannot pay the tax owed in full when it is due and you give the IRS any information needed to make that determination. You agree to pay the full amount you owe within 3 years and to comply with the tax laws while the agreement is in effect. Caution A Notice of Federal Tax Lien may be filed to protect the government s interests until you pay in full. How the Process Works IRS will usually let you know within 30 days after IRS receive your request whether it is approved or denied. However, if this request is for tax due on a return you filed after March 31, it may take us longer than 30 days to reply. If IRS approves your request, IRS will send you a notice detailing the terms of your agreement and requesting a fee of $105 ($52 if you make your payments by electronic funds withdrawal). However, you may qualify to pay a reduced fee of $43 if your income is below a certain level. The IRS will let you know whether you qualify for the reduced fee. If the IRS does not say you qualify for the reduced fee, you can request the reduced fee using Form 13844, Application For Reduced User Fee For Installment Agreements. You will also be charged interest and may be charged a late payment penalty on any tax not paid by its due date, even if your request to pay in installments is granted. Interest and any applicable penalties will be charged until the balance is paid in full. Current interest rates are 3% per annum and you also will be charged a late payment penalty of ¼% per month. 12

18 By approving your request, IRS agrees to let you pay the tax you owe in monthly installments instead of immediately paying the amount in full. In return, you agree to make your monthly payments on time. You also agree to meet all your future tax liabilities. This means that you must have enough withholding or estimated tax payments so that your tax liability for future years is paid in full when you timely file your return. Your request for an installment agreement will be denied if all required tax returns have not been filed. Any refund due you in a future year will be applied against the amount you owe. If your refund is applied to your balance, you are still required to make your regular monthly installment payment. Payment Methods You can make your payments by check, money order, credit card, or one of the other payment methods shown next. The fee for each payment method is also shown. Payment method Applicable fee Check, money order, or credit card $105 Electronic funds withdrawal $ 52 Payroll deduction installment agreement $105 After IRS receives each payment, IRS will send you a notice showing the remaining amount you owe, and the due date and amount of your next payment. But if you choose to have your payments automatically withdrawn from your checking account, you will not receive a notice. Your bank statement is your record of payment. IRS will also send you an annual statement showing the amount you owed at the beginning of the year, all payments made during the year, and the amount you owe at the end of the year. If you do not make your payments on time or do not pay any balance due on a return you file later, you will be in default on your agreement and IRS may take enforcement actions, such as the filing of a Notice of Federal Tax Lien or an IRS levy action, to collect the entire amount you owe. To ensure that your payments are made timely, you may consider making them by electronic funds withdrawal Requests to Modify or Terminate An Installment Agreement After an installment agreement is approved, you may submit a request to modify or terminate an installment agreement. This request will not suspend the statute of limitations on collection. While the IRS considers your request to modify or terminate the installment agreement, you must comply with the existing agreement. An installment agreement may be terminated if you provide materially incomplete or inaccurate information in response to an IRS request for a financial update. 13

19 Where to File Attach Form 9465-FS to the front of your return and send it to the address shown in your tax return booklet. If you have already filed your return or you are filing this form in response to a notice, file Form 9465-FS by itself with the Internal Revenue Service Center using the address in the table below that applies to you. For all taxpayers except those filing Form 1040 with Schedule(s) C, E, or F for any tax year for which this installment agreement is being requested. IF you live in... THEN use this address... Department of the Treasury Alabama, Florida, Georgia, Kentucky, Louisiana, Internal Revenue Service Mississippi, North Carolina, South Carolina, Texas, P.O. Box Virginia Stop 74 Doraville, GA Alaska, Arizona, Colorado, Connecticut, Delaware, Department of the Treasury District of Columbia, Hawaii, Idaho, Illinois, Maine, Internal Revenue Service Maryland, Massachusetts, Montana, Nevada, New 310 Lowell St. Hampshire, New Jersey, New Mexico, North Dakota, Stop 830 Oregon, Rhode Island, South Dakota, Tennessee, Andover, MA Utah, Vermont, Washington, Wisconsin, Wyoming Department of the Treasury Arkansas, California, Indiana, Iowa, Kansas, Internal Revenue Service Michigan, Minnesota, Missouri, Nebraska, New York, Stop P Ohio, Oklahoma, Pennsylvania, West Virginia Kansas City, MO A foreign country, American Samoa, or Puerto Rico (or are excluding income under Internal Revenue Department of the Treasury Code section 933), or use an APO or FPO address, Internal Revenue Service or file Form 2555, 2555-EZ, or 4563, or are a dualstatus alien or nonpermanent resident of Guam or the Austin, TX South I-H 35, 5501AUSC Virgin Islands* * Permanent residents of Guam or the Virgin Islands cannot use Form 9465-FS. For taxpayers filing Form 1040 with Schedule(s) C, E, or F for any tax year for which this installment agreement is being requested. IF you live in... THEN use this address... Alabama, Arkansas, Georgia, Illinois, Indiana, Iowa, Department of the Treasury Kansas, Kentucky, Louisiana, Michigan, Minnesota, Internal Revenue Service Mississippi, Missouri, Nebraska, New Jersey, North P.O. Box 69 14

20 Dakota, Ohio, Oklahoma, Pennsylvania, SouthStop 811 Dakota, Tennessee, Texas, West Virginia, Wisconsin Memphis, TN Department of the Treasury Alaska, Arizona, California, Colorado, Hawaii, Idaho, Internal Revenue Service Montana, Nevada, New Mexico, Oregon, Utah, P.O. Box 9941 Washington, Wyoming Stop 5500 Ogden, UT Department of the Treasury Internal Revenue Service Connecticut, Maine, Massachusetts, New Hampshire, P.O. Box 480 New York, Rhode Island, Vermont Stop 660 Holtsville, NY Department of the Treasury Delaware, Florida, Maryland, District of Columbia, Internal Revenue Service North Carolina, South Carolina, Virginia Stop 4 N Philadelphia, PA A foreign country, American Samoa, or Puerto Rico (or are excluding income under Internal Revenue Department of the Treasury Code section 933), or use an APO or FPO address, Internal Revenue Service or file Form 2555, 2555-EZ, or 4563, or are a dualstatus alien or nonpermanent resident of Guam or the Austin, TX South I-H 35, 5501AUSC Virgin Islands* * Permanent residents of Guam or the Virgin Islands cannot use Form 9465-FS. IRS Offers New Penalty Relief and Expanded Installment Agreements to Taxpayers under Expanded Fresh Start Initiative On March 7, the Internal Revenue Service announced a major expansion of its Fresh Start initiative to help struggling taxpayers by taking steps to provide new penalty relief to the unemployed and making Installment Agreements available to more people. Under the new Fresh Start provisions, part of a broader effort started at the IRS in 2008, certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties. In addition, the IRS is doubling the dollar threshold for taxpayers eligible for Installment Agreements to help more people qualify for the program. Penalty Relief The IRS announced plans for new penalty relief for the unemployed on failure-topay penalties, which are one of the biggest factors a financially distressed taxpayer faces on a tax bill. 15