B. Time for Payment of Tax

PRESENT LAW

In general, any tax is required to be paid in full by the date the return for the tax is due to be filed (sec. 6151). Numerous exceptions are provided to this rule. Some of these exceptions require advance payments through periodic deposits as payments are made or received (e.g., payroll tax withholding). Other exceptions provide that, at the election of the taxpayer, tax may be paid in installments after the due date otherwise established for filing a return of the particular tax. Examples of taxes that may be paid in installments after the return due date are the highway use tax (sec. 6156) and estate tax attributable to certain interests in closely held businesses (sec. 6166). Finally, the Internal Revenue Service generally has discretion to extend the time for payment of tax for a reasonable period not exceeding 6 months (12 months in the case of estate tax) (sec. 6161).

EXPLANATION OF PROVISIONS

The bill would specifically authorize the IRS to enter into written agreements with any taxpayer providing for installment payments of tax in any case where IRS determined that such an agreement would facilitate the collection of tax. In addition, the bill would require the IRS to make a written offer of such an agreement to any individual whose tax liability did not exceed $20,000 and who had not been delinquent in payments under any other similar agreement entered within the three years preceding the due date of the currently unpaid tax liability.

Agreements under this new provision would be binding on the IRS unless the Service showed that the information provided by the taxpayer prior to the date of agreement was inaccurate or incomplete. Additionally, if the financial condition of the taxpayer changed subsequent to the agreement, the IRS could alter or annul the agreement. Before an agreement could be unilaterally changed by the IRS, however, the taxpayer would be entitled to a hearing.