5.14.10  Payroll Deduction Agreements and Direct Debit Installment Agreements

Manual Transmittal

January 22, 2015

Purpose

(1) This transmits a revision for IRM 5.14.10, Installment Agreements, Payroll Deduction Agreements and Direct Debit Installment Agreements

Material Changes

(1) IRM 5.14.10.2 update information regarding third party contacts

(2) IRM 5.14.10.2 include language requiring either the payroll deduction or direct debit method of payment is Streamlined agreements with UBA between $25,001 and $50,000.

(3) IRM 5.14.10.4 include language regarding the DDIA requirement for IBTF Express agreements with UBA between $10,001 and $25,000.

(4) IRM 5.14.10.4 update the user fee for a regular agreement

(5) IRM 5.14.10.4 include language requiring either the payroll deduction or direct debit method of payment for Streamlined agreements with UBA between $25,001 and $50,000.

(6) IRM 5.14.10.4 include instructions for mirroring joint liabilities where only one taxpayer requests an installment agreement.

(7) IRM 5.14.10.4 added the requirement for the GM to physically sign the Form 433-D when the DDIA requires GM approval.

(8) IRM 5.14.10.4 updated address information and procedures when a taxpayer's bank account is erroneously debited.

(9) IRM 5.14.10.5 revised procedures for completing Direct Debit installment agreements for In-business trust fund taxpayers.

(10) IRM 5.14.10.8 added Direct Pay as a method of making installment agreement payments.

Effect on Other Documents

This material supersedes IRM 5.14.10, dated March 11, 2011.

Audience

SB/SE Collection Employees

Effective Date

(01-22-2015)

Dretha Barham
Director, Collection Policy

5.14.10.1  (08-09-2010)
Overview

  1. This chapter provides procedures for processing Payroll Deduction agreements and Direct Debit installment agreements. Payroll deduction agreements are agreements where employers deduct payments from taxpayer’s wages, and mail them to the Internal Revenue Service. Direct Debit Installment Agreements allow the Service to debit taxpayers' bank accounts. Payroll Deduction agreements and Direct Debit installment agreements benefit the taxpayer by reducing the likelihood of default and lessening taxpayer burden.

5.14.10.2  (01-22-2015)
Payroll Deduction Agreements

  1. The use of Form 2159, Payroll Deduction Agreement, must be strongly encouraged when the taxpayer is a wage earner, particularly if the taxpayer defaulted on a previous installment agreement.

  2. Streamlined installment agreements with aggregate unpaid balance of assessments (UBA) between $25,001 and $50,000 require either a payroll deduction agreement or direct debit as the method of payment.

  3. Taxpayers should determine whether their employers will accept and process executed agreements before agreements are submitted for approval or finalized.

  4. Comptroller General decision B–45105 (signed in 1955) requires Federal Agencies to deduct and pay over the amount shown on payroll deduction agreements.

  5. Allow a reasonable period for the employer to complete the necessary bookkeeping and submit the first payment.

  6. Encourage taxpayers to hand deliver agreements to employers; otherwise mail agreements to employers. Ensure that the third party contact requirements of IRC 7602(c) have been observed before mailing agreements to employers. See IRM 5.1.1.10.1,Field Collecting Procedures for instructions regarding the provision of advance notice to the taxpayer of third party contact.

  7. The employer and the taxpayer must sign Form 2159 before submission to the manager for approval.

  8. Ensure TC 971 AC 043 is input on all modules within 24 hours of the taxpayer’s request for a payroll deduction agreement.

  9. If employers must be contacted during payroll deduction agreements, ensure Letter 3164 A, (Third Party Contact letter) was sent previously. ICS systemically generates Third Party Contact (TPC) data and updates the TPC Command Code database if the revenue officer utilizes the Taxpayer or Asset Location Activity menu within the History section of ICS. If this ICS feature is not used, complete Form 12175 and properly route to the Third Party Contact coordinator. (See IRM 25.27.1.4, Third Party Contacts.)

  10. To insure proper remittance and posting, instruct employers, or request taxpayers advise their employers, to show taxpayers' names and TINs, tax form(s) and period(s) on all remittances.

  11. Determine the correct agreement locator number (ALN) , per Exhibit 5.14.1–2 for Payroll Deduction Agreements. Generation of the Form 2159 from the ICS Templates menu will automatically default the "XX" position of the ALN to "11" while allowing the initiator to select the appropriate indicator for the "YY" position of the ALN. For most circumstances, the ALN will be 1109.

5.14.10.3  (03-11-2011)
Preparation and Distribution of Form 2159, Payroll Deduction Agreement

  1. Provide the following to the taxpayer to be delivered to the employer:

    1. Form 2159;

    2. a business reply envelope addressed to the revenue officer to return the signed Form 2159; and

    3. a business reply envelope addressed accordingly to be used to mail the first payment. The correct address for this envelope can be found at http://serp.enterprise.irs.gov/databases/who-where.dr/balance_due_accounts.htm, Service Center Collection Addresses for Form 2159.

      Note:

      Notate the purpose on each envelope, so that Form 2159 is returned to the appropriate address.

    These may be mailed directly to employers if taxpayers received Letter 3164 A or it was sent at least ten days prior to mailing the Form 2159. (See IRM 5.14.10.2(6)). (Also, see IRM 5.14.10.3(7) for cases involving members of the Armed Forces overseas.) .).

  2. Request taxpayers immediately notify their employers of payroll deduction requests and the purpose of the two envelopes.

  3. Submit the case for approval after the taxpayer and employer have executed the Form 2159. (See IRM 5.14.9.2. Routine and Manually Monitored Installment Agreement Dispositions)

  4. After Form 2159 is approved, return the Employer's Copy to the taxpayer to give or mail to their employer, unless the taxpayer received Letter 3164 A or at least ten days have passed since it was mailed to the taxpayer, in which case the Employer's copy of Form 2159 may be mailed directly to the employer. (See IRM 5.14.10.2(6).)

  5. Provide the taxpayer with the Taxpayer’s Copy of the form.

  6. Attach the approved Acknowledgment Copy to the balance due file. Close the case on ICS by selecting "Option B" from the Installment Agreement menu. Select "Payroll Deduction" as the IA type. Use the systemically generated Form 3210 to route the case to CCP for input. A systemic history is written to ICS.

  7. If a payroll deduction agreement is made with a member of the Armed Forces overseas, forward the complete assembly to the taxpayer to give to his or her Commanding Officer or mail it directly to the Commanding Officer if Letter 3164 A was mailed at least 10 days earlier. (See IRM 5.14.10.2(6).) In these cases, the Taxpayer’s Copy of the assembly will be furnished to the taxpayer by the military establishment. . Upon receipt of the approved Acknowledgment Copy, attach to the balance due file and process the case appropriately (See IRM 5.14.10.3(6).

5.14.10.4  (01-22-2015)
Direct Debit Installment Agreements

  1. Direct debit installment agreements (DDIA) should be strongly encouraged when a payroll deduction agreement is not practical or appropriate, and especially encouraged if taxpayers defaulted on previous installment agreement(s).

  2. In cases involving joint liabilities where the taxpayers are separated or divorced, and only one party wishes to enter into an installment agreement, the account must be mirrored. See IRM 5.19.1.5.4.12.1 (Liability Collection). CSCO (Compliance Services Collection Operations) will not input DDIAs involving joint liabilities unless both taxpayer's signatures appear on the Form 433-D, Installment Agreement.

  3. The direct debit method of payment is required on all IBTF Express agreements with UBA (unpaid balance of assessment) between $10,001 and $25,000.

  4. Streamlined installment agreements with aggregate unpaid balance of assessments (UBA) between $25,001 and $50,000 require either a payroll deduction agreement or direct debit as the method of payment.

  5. The Direct Debit Installment Agreement (DDIA) system is a means by which funds are automatically debited from a taxpayer’s checking account for the agreed upon installment amount. Some benefits of using direct debit installment agreements are:

    1. The user fee is lower for a DDIA ($52) than it is for a regular agreement ($120);

    2. less chance of taxpayers forgetting to make their payment;

    3. less chance of a missed payment because the money was spent on other expenses;

    4. since no check is involved, there is no chance of it being lost, mishandled, misapplied, or returned as incomplete or unsigned;

    5. IRS personnel will not have to manually post checks;

    6. "float" time associated with processing paper documents is eliminated; and

    7. the installment agreement default rate is reduced.

  6. The Electronic Federal Tax Payment System (EFTPS) is used to process the DDIA by electronic funds transfer. See Publication 966, website http:www.eftps.gov or call 1-800-555-4477.

  7. Take the following steps for proper completion of a DDIA:

    1. Use "Option A" within the Installment Agreement menu on ICS, select the correct IA type: Direct Debit IA , Direct Debit Streamlined IA, IBTF/Direct Debit Combination or IBTF Express/Direct Debit Combination, ICS will generate the Form 433-D and Letter 2849 .

    2. On the Form 433-D, document the account number and bank routing number OR attach a copy of a cancelled check. The account and routing number are required fields when completing the Form 433-D, via "Option A" within the ICS application. A systemic ICS history will record the bank account information.

    3. Establish the first payment date on the Form 433-D for 60-days from the date the IA is established. The expectation is the DDIA should be input into Status 60 within 30-45 days.

    4. Advise the taxpayer the first payment will not be withdrawn from their bank account for approximately 60-days.

    5. On ICS, the Agreement Locator Number (ALN) will default to an "03" for the "XX" value and the highest priority value will be assigned for the "YY" value. (See Exhibit 5.14.1-2, Installment Agreement Locator Numbers.

    6. The taxpayer must sign the Form 433–D when this type of agreement is secured.

    7. If the agreement requires managerial approval, the group manager must physically sign the form 433-D.

  8. After securing the taxpayer's and group manager's (if applicable) signatures on the Form 433-D , take the following steps for correct routing and processing the DDIA:

    1. E-mail. This is the preferred method of submission. Scan the Form 433-D that contains the taxpayer(s) and Group Manager's (if applicable) physical signatures with the bank account and routing numbers. Attach the scanned 433-D to the Outlook message and send via secure E-mail to the CSCO mailbox at *SBSE PSC CSCO DDIA. To expedite the processing, the subject line should state "DDIA Input" and include the last four digits of the taxpayer's SSN or EIN and the Name Control.

    2. E-Fax. A DDIA can also be E-Faxed to the Philadelphia CSCO Campus. E-Fax the Form 433-D containing the taxpayer(s) and Group Manager (if applicable) physical signatures and bank account and routing numbers. The completed Form 433-D can be E-Faxed to 1-855-235-6786

    3. Mail. Forward the completed Form 433-D with the bank account information or copy of a cancelled check on the ICS generated Form 3210 for input. ALL field DDIAs are input at the Philadelphia CSCO campus. The address on the systemically generated Form 3210 is :

      Internal Revenue Submission Processing Center

      Mail Stop 4-N31.142

      2970 Market Street

      Philadelphia, PA 19104

    4. Send the closed Bal Due case file on a manually created Form 3210 to Mail Stop 5-E04.115 or on a Form 795B.

    5. Mail Letter 2849, DDIA Acceptance Letter to the taxpayer and representative, if applicable.

    ..

  9. Occasionally, the IRS may erroneously debit a taxpayer’s bank account. Erroneous debits include IRS initiated duplicate debit entries, debit entries in an amount greater than authorized under the DDIA, and debit entries initiated for settlement earlier than authorized by the taxpayer under the DDIA.

  10. Once an erroneous debit has been identified, and the IRS has confirmed that the taxpayer is not seeking indemnification from his bank, the IRS should immediately take steps to return the erroneously debited funds using manual refund procedures. See IRM 5.1.12.20.1, Manual Refund Procedures. Note: In order to initiate the return of the erroneous debit, all that needs to be established is that the debit entry is erroneous, and that the taxpayer is not also seeking compensation from his or her bank. The taxpayer need not establish hardship or any other criteria. If, however, the taxpayer instructs the IRS to apply the erroneous debit entry to the tax liability, the IRS may follow the taxpayer’s instructions.

  11. Under the Small Claims Act, the IRS may reimburse taxpayers for bank fees incurred due to Service error in implementing a DDIA if the fees were incurred solely because of the Service's error and the taxpayer did not compound the problem. The claim must be filed within one year after the fee is imposed by the bank. Follow the procedures for filing a claim for bank charges due to Service loss or misplacement of a taxpayer check found at IRM 3.17.10.5,Accounting and Data Control.

5.14.10.5  (03-11-2011)
Direct Debit Installment Agreements for IBTF Cases

  1. Take the following steps for completion of a DDIA for an IBTF Express or CCP/IBTF-IA:

    1. Use "Option A" within the Installment Agreement menu on ICS, select the appropriate IA type: "- IBTF Express/Direct Debit Combination" , or ; "- IBTF/Direct Debit Combination"

    2. Follow the steps outlined above in IRM 5.14.10.4(7)(a-g)..

    3. On ICS, the Agreement Locator Number (ALN) will default to an "03" for the "XX" value and the highest priority value will be assigned for the "YY" value. Generally, the ALN will default to 0315.(See Exhibit 5.14.1-2, Installment Agreement Locator Numbers)

    4. Ensure the taxpayer signs the Form 433-D.

  2. These cases are input into Status 60 on IDRS. Only the IBTF-IA is monitored in CCP via an OI systemically created when the IA is approved. For the IBTF-DDIA combinations, information must be sent to both CCP and the Philadelphia CSCO Campus. CCP needs to receive the case file for monitoring and the Philadelphia Campus needs to receive the DDIA information to establish the DDIA processing.

  3. The IBTF Express IA is NOT monitored at CCP. Thus, no NF OI is created.

  4. Forward the case file to the Group Manager for review, approval and signature. Once the Group Manager approves the IA, take the following steps for correct routing and processing of the IBTF-DDIA:

    1. Forward the IBTF-IA case file to CCP for monitoring on the systemically generated Form 3210 at Mail Stop 5-E04.117.

    2. Forward the IBTF Express IA case file to closed files on the systemically generated Form 3210 at Mail Stop 5-E04.115.

    3. E-mail. This is the preferred method of submission. Scan the Form 433-D that contains the taxpayer(s) and Group Manager's physical signatures with the bank account and routing numbers. Attach the scanned 433-D to the Outlook message and send via secure E-mail to the CSCO mailbox at *SBSE PSC CSCO DDIA. To expedite the processing, the subject line should state "DDIA Input" and include the last four digits of the taxpayer's SSN or EIN and the Name Control.

    4. E-Fax. A DDIA can also be E-Faxed to the Philadelphia CSCO Campus. E-Fax the Form 433-D containing the taxpayer(s) and Group Manager physical signature and bank account and routing numbers. The completed Form 433-D can be E-Faxed to 1-855-235-6786

    5. Mail. Forward the completed Form 433-D with the bank account information or copy of a cancelled check on the ICS generated Form 3210 for input. ALL field DDIAs are input at the Philadelphia CSCO campus. The address on the systemically generated Form 3210 is :

      Internal Revenue Submission Processing Center

      Mail Stop 4-N31.142

      2970 Market Street

      Philadelphia, PA 19104

    6. Mail Letter 2849 to the taxpayer and representative, if applicable.

    .

5.14.10.6  (03-11-2011)
Credit (and Debit) Card Payments by Taxpayers

  1. Taxpayers may make payments, including installment agreement payments, with a credit or debit card. See IRM 21.2.1.48, Electronic Payment Options for Individuals and Business e-file Users, for more information.

5.14.10.7  (03-11-2011)
Electronic Funds Transfers by Taxpayer

  1. Taxpayers may make payments, including installment agreement payments, by making Electronic Funds Transfers (EFT) using the Electronic Federal Tax Payment System (EFTPS). See Publication 966 Electronic Federal Tax Payment System, website http://www.eftps.gov or call 1-800-555-4477 for more information.

5.14.10.8  (01-22-2015)
Direct Pay

  1. IRS Direct Pay is a new payment application available to IMF Taxpayers to make secure, electronic payments, including installment agreement payments from their checking or savings accounts. The Direct Pay option is located under the "Payments" tab at http://www.irs.gov.


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