Page 219 Executive Summary Every payment plan allowance is statutory but subject to regulatory oversight by IRS but they have: 10: Payment Options

Executive Summary The staffing pressure that IRS current has means: Page 219 Executive Summary The staffing pressure that IRS current has means: Enforced collections are down – take the opportunity to proactively settle the case. Increasing use of electronic programs mean it is tougher to get into negotiation system. Average dollars collected by an OIC are increasing. 10: Payment Options

Page 220 Executive Summary IRS has a collection problem – Less people to do the job – furnish a solution 10: Payment Options

Payment Options Payment Choices: Direct Debit Debit or Credit Card Page 220 Payment Options Payment Choices: Direct Debit Debit or Credit Card EFTPS Electronic Funds Withdrawal (when filing) Same-day Wire Payment Check or Money Order 10: Payment Options

Payment Options Go to irs.gov Page 221 Image courtesy of irs.gov/Payments/Direct-Pay 10: Payment Options

Payment Options If you cannot pay now: Deferred Payment Agreements Page 221 Payment Options If you cannot pay now: Deferred Payment Agreements Installment Payment Agreements Offers in Compromise Currently Not Collectible 10: Payment Options

Payment Options Remember some issues to discuss with client: Page 222 Payment Options Remember some issues to discuss with client: Interest and penalties continue to accrue during payment plans (except OIC). Eligibility must be proved for most payment plans. During payment plans taxpayer must remain compliant. Does client have necessary discipline. 10: Payment Options

Payment Options The IRS as a creditor: Page 112 Payment Options The IRS as a creditor: 0.5% late payment penalty up to a to a total of 25% (first 50 months) 4.0% compounded daily This yields a effective rate of 10.0% annually 10: Payment Options

Extensions of Time to Pay Page 222-223 Extensions of Time to Pay A taxpayer has the statutory right (administrated by IRM 5.14.5.5) to ask for a “short term” extension of time to pay: 30 to 120 days – Normally will be granted. Undue Hardship – File Form 1127 An extension of time to pay is not an installment agreement, the IRM tells IRS not to treat it as one. No Notice of Intent to Levy No Notices of Hearing No Levy 10: Payment Options

Extensions of Time to Pay Page 223 Extensions of Time to Pay The granting of an extension: Stop enforcement actions until end of extension period. Can be given over the telephone or by written request. Post extension broken promises will be met with swift reprisal. 10: Payment Options

Page 223 Installment Payments IRC 6159 – “The secretary is authorized to enter into written agreements with any taxpayer…” IRM 5.14.1 Overview Says – “are arrangements whereby … taxpayers to pay liabilities over time” 10: Payment Options

Installment Payments To obtain file Form 9465 Page 224 Installment Payments To obtain file Form 9465 As much as an inventory reduction tool as compliance tool for today’s IRS 10: Payment Options

Page 224 Installment Payments Be wary of the PPIA (Partial Pay Installment Agreement) and CNC (Currently Not Collectable) IRC 6159 allows IRS to enter into an installment agreement that will not pay during the CSED. In year 7-8 IRS becomes interested in T/P to determine if T/P has accumulated assets IRS says we need to discuss our share of that accumulation 10: Payment Options

Installment Payments Caution Page 224 Installment Payments Caution Placing a taxpayer in a small payment or even a CNC (currently not collectible) status can assist with an IRS enforcement position but may cause the previous problem toward the end of the statute 10: Payment Options

Installment Agreements Currently Not Collectable (CNC) Page 225 A request for IRS to temporarily delay the collection process as current payment will create a significant economic hardship. Occurs when RCP < $75 Can be in place until expiration of Collection Statute Expiration Date (CSED) Request status to last contact address in same manner as installment payment request A phone call can accomplish placing the account in CNC 10: Payment Options

Page 225 Installment Payments Observation: If the taxpayer has little cash flow AND no assets the option of the OIC may be more beneficial: This may present a PERMANENT solution for the taxpayer rather than kicking the can down the road 10: Payment Options

Installment Payments Important considerations IRM 5.14.1 Page 225 Installment Payments Important considerations IRM 5.14.1 Enforcement is stayed during the consideration of an installment agreement request plus 30 days Good – IRS can not levy property of taxpayer during period they consider IA request Bad – The statute of limitations is extended while an IA is in pending status – Page 230 (g) 10: Payment Options

Installment Payments Reg. 301.6159 Page 226 Installment Payments Reg. 301.6159 The finalization of the regulations were intended to deal with the continual problem of installment agreement processing and termination of IA request Regulations reproduced Page 226-230 10: Payment Options

Installment Payments Important considerations Page 227 Installment Payments Important considerations Reg. 301.6159 (Page 226-230) – Proposed installment agreements become such when accepted by IRS as processable A proposed installment agreement stays in processing status until it is: Accepted by IRS Rejected by the IRS Withdrawn by the Taxpayer 10: Payment Options

Page 230 Installment Payments The bi-annual review of the taxpayer’s financial condition 10: Payment Options

Page 230 Installment Payments Effect of installment agreement or pending installment agreement on collection activity NO levy may be made to collect a tax liability that is subject to an installment agreement During the period that a proposed agreement is pending During the period that an installment agreement is in effect plus 30 days 10: Payment Options

Installment Payments Best Practices Page 230 Installment Payments Best Practices As the statute suspends during the period of consideration by the IRS plus 30 days the practitioner should monitor the process. Not infrequently a taxpayer has discovered they have had an IA under consideration for a multi-year period 10: Payment Options

Installment Payments Installment must be allowed when: Page 231 Installment Payments Installment must be allowed when: Total tax liability DOES NOT exceed $10,000 The taxpayer HAS NOT: Failed to file Failed to pay Entered into another IA 10: Payment Options

Installment Payments Not financially able – really just has to ask for Page 231 Installment Payments Not financially able – really just has to ask for Payments will full pay in 3 years Taxpayer is fully compliant with ALL provisions of the code during the period of the agreement 10: Payment Options

Page 231 Installment Payments Failure to adhere to the terms of an IA will subject the taxpayer to the revocation of the agreement and the reinstatement of enforcement action by the IRS IRS maintains this includes payments of estimated taxes 10: Payment Options

Installment Payments Expect the agreement to be cancelled when: Page 231 Installment Payments Expect the agreement to be cancelled when: A return due is not filed Payment is not made timely for agreement or newly assessed tax Failure to provide financial info When IRS revokes an installment agreement the taxpayer has 30 days to request a collection appeal. 10: Payment Options

Installment Payments The Installment Agreement (IA) Page 231 Installment Payments The Installment Agreement (IA) You Need A Scorecard to keep track of: Statutory Streamlined Streamlined – Fresh Start Current Test System in Place irs.gov/businesses/small-businesses-self-employed/streamlined-processing-of-installment-agreements 10: Payment Options

Installment Payments The Installment Agreement (IA) Page 231 Installment Payments The Installment Agreement (IA) To Obtain an IA you can: Call IRS at number on notice (Nope call PPS) Submit with Return Complete Form 9465 and send to address on notice or Use the IRS’s OPA 10: Payment Options

Page 232 Installment Payments The Score Card can be found at irs.gov/businesses/small-businesses-self-employed/streamlined-processing-of-installment-agreements Less than $50,001 Up to 72 months No CIS Pay your Way DDIA – No FTL up to $50,000 10: Payment Options

Page 232 Installment Payments The Score Card can be found at irs.gov/businesses/small-businesses-self-employed/streamlined-processing-of-installment-agreements $50,001 - $100,000 84 months No CIS if DDIA Pay your Way FTL determination required 10: Payment Options

Installment Payments New Fee Schedule in 2017 Page 122 10: Payment Options

Page 122 Installment Payments Advantages of the Direct Debit Installment Agreement (DDIA) Reduced Fees – Save $55 Less likely payments will be missed Many taxpayers are eligible (unless in agreement) to have tax liens removed. 10: Payment Options

Installment Payments Working with IRS on an IA: Page 233-234 10: Payment Options

Installment Payments Working with IRS on an IA: Page 234 Installment Payments Working with IRS on an IA: Item 5 – Prepare a checklist for each item and indicate why there is no response to those items that do not apply to the taxpayer. Consider use of Form 4822 – Will not find on irs.gov but can find Form using a Google search 10: Payment Options

Page 235 Installment Payments Type Here 10: Payment Options

Page 235 Installment Payments 10: Payment Options

Page 258 Page 236 10: Payment Options

Online Payment Agreement (OPA) Page 237-240 Online Payment Agreement (OPA) Online Payment Agreements (OPA) run search on irs.gov to facilitate locating OPA start page - irs.gov/individuals/online-payment-agreement-application 10: Payment Options

Online Payment Agreement (OPA) Page 237 Online Payment Agreement (OPA) Individuals 10: Payment Options

Online Payment Agreement (OPA) Page 237 Online Payment Agreement (OPA) Business Taxpayers 10: Payment Options

Online Payment Agreement (OPA) Page 239 Online Payment Agreement (OPA) Can a POA make the OPA application? Yes 10: Payment Options

Online Payment Agreement (OPA) Page 238-239 Online Payment Agreement (OPA) The system will: Determine Eligibility Verify that T/P meets agreement criteria Same as what can be obtained over phone Move the individual through a five step process. Ask for a valid e-mail address. If T/P verification of identity. POA will provide shared secret info. Evaluate that POA has authority for all periods. 10: Payment Options

Online Payment Agreement (OPA) Page 239 Online Payment Agreement (OPA) OPA is a dynamic system allowing: 10: Payment Options

Installment Agreements Page 239 Online Payment Agreement (OPA) 10: Payment Options

Online Payment Agreement (OPA) Page 239 Online Payment Agreement (OPA) Why OPA versus calling ACS – Written verification of acceptance of installment agreement. 10: Payment Options

Offers in Compromise (OIC) Page 240 Offers in Compromise (OIC) IRS Policy Statement P-5-100 Offers will be accepted when it is unlikely that the tax debt can be collected in full. The taxpayer must initiate the process. Taxpayers are responsible to prove their eligibility. THE COMMISSIONER HAS ABSOLUTE DISCRETION TO ACCEPT OR REJECT ALL OFFERS. 10: Payment Options

Offers in Compromise (OIC) Page 240 Offers in Compromise (OIC) The Problems: Internal Psychology continues to resist offers in many situations. Processing fails to meet demand. IRS holds most of the cards. The service has up to two years to investigate offer. 20% of offer must be paid upon submission. 10: Payment Options

Offers in Compromise (OIC) Page 241 Offers in Compromise (OIC) Taxpayer Note: Form 656 updated in March 2017 IRS Form 656 10: Payment Options

Offers in Compromise (OIC) Page 241 Offers in Compromise (OIC) 10: Payment Options

Offers in Compromise (OIC) Page 241-242 Offers in Compromise (OIC) Types of Offers: Doubt as to Liability – Submit Form 656-L Doubt as to Collectability – Form 656 Promote Effective Tax Administration 10: Payment Options

Offers in Compromise (OIC) Page 242 Offers in Compromise (OIC) Two kinds of offers: Lump Sum Offer – Payments are made over 5 months or less – 12 x RCP (Reasonable Collection Potential). Short Term Offer – Payments made over 6 – 24 months – 24 x RCP 10: Payment Options

Offers in Compromise Look to the IRM for guidance: Page 242 Offers in Compromise Look to the IRM for guidance: Dissipation of assets IRM 5.8.5.16 Income earned versus equity of a business asset IRM 5.8.5.5.1 Additional expense allowances Accept oral testimony Continues to be a difficult process 10: Payment Options

Offers in Compromise (OIC) Page 244 Offers in Compromise (OIC) Before submitting consider: Do you have the current forms. 2/3 of all applications are not approved User fees are required to be paid in the amount of $186 (IRS says it costs them $3,000 to process. The 20% stays with the IRS if the offer is denied. 10: Payment Options

Offers in Compromise Page 243 Failure to designate the 20% payment means IRS get to do so by statutory methodology 10: Payment Options

Offers in Compromise (OIC) Page 243 Offers in Compromise (OIC) Image courtesy of http://irs.treasury.gov/oic_pre_qualifier/ 10: Payment Options

Offers in Compromise (OIC) Page 243 Offers in Compromise (OIC) Image courtesy of http://irs.treasury.gov/oic_pre_qualifier/ 10: Payment Options

Offers in Compromise (OIC) Page 243 Offers in Compromise (OIC) Image courtesy of http://irs.treasury.gov/oic_pre_qualifier/ 10: Payment Options

Offers in Compromise (OIC) Page 244 Offers in Compromise (OIC) Client Discipline Five years of absolute tax compliance including: Returns filed Payments made All prior payments of OIC will be forfeited if any failure of compliance. 10: Payment Options

The IRS allows many ways for a Taxpayer to Pay In working with IRS on installment agreements we find: By a show of hands: The IRS wants to endlessly discuss the financial condition of the client. It has become easier over the last several years to arrange and installment payment program with the IRS. As our clients realize that the IRS is more agreeable to estimates they are more likely not to pay their taxes. Our clients default on most of their installment agreements. 10: Payment Options