Leverage Electronic Signature Legitimacy for Payroll Deduction Authorization in United States

How to eSign a document: electronic signature legitimacy for Payroll Deduction Authorization in United States

video we'll be going over IRS form 2159 payroll deduction agreement this form is usually completed by a taxpayer who is has agreed at least in principle with the Internal Revenue Service on establishing an installment agreement looking to have their tax payments directly deposited from their paychecks ing to the internal revenue manual this is a highly recommended way of a green to an installment agreement specifically for wage employees who are paid on a regularly scheduled basis not necessarily for seasonal or self-employed individuals seasonal employees or self-employed individuals however you may be eligible for a reduced user fee or an eliminated user fee if you use a payroll deduction agreement uh and this is the only other option you may also be able to establish a direct debit instrument uh installment agreement but that is beyond the scope of this article and this form would be a backstop for taxpayers who are not able to make debit payments so there are six pages to this tax form uh the first page is is the acknowledgment copy of the form that is returned to the IRS there's a version of this that's for the employer to acknowledge and authorize a payroll deduction agreement is subject to an employer's authorization and then finally the last version is the taxpayers copy so behind the employer's version and the taxpayers version or specific instructions to each individual or entity so we're going to go to the top of the form and we're simply going to go over how to complete this form so uh you would enter into the employer's field whatever the employer's name is we'll just assume that we're using Acme grocery store one two three and then you would enter whatever the taxpayer's name is and then if there's a separate point of contact then you would enter that person's name in there so this is for the employer if if the IRS has deemed the tax debt to be satisfied early then this gives the IRS a point of contact at the employer to reach out to so they can stop the payroll deduction so foreign then on the right we'll enter the social security number for the taxpayer if the taxpayer has an employer identification number instead of a social security number then you may enter that as well and then if the taxpayer is married you would enter the last four digits of their spouse's social security number so in the employer field there are instructions on the back of part two and they specify certain things that the employer should do right establishing the contact a person in the case that the IR IRS needs to reach out and change the installment agreement or terminate it because the employees tax liability has already been satisfied and then the employer should complete this block that says how often the employee is paid and the date by which the employer will send money that they have deducted from the employee's check so this is an additional administrative task that an employer May has to take on where they actually have to physically withhold earnings and then send a check to the IRS made payable to the United States Treasury so specifically the instructions on the back of the Forum state that an employer should write their employees name and social security number on each payment and then send the money to the IRS mailing address that that's on the letter that accompanied the agreement normally this agreement would be sent to a taxpayer as part of an ongoing discussion or you know as part of the collections process so even though this might not be pleasant to a taxpayer further escalations of the tax Coalition collection effort are much more uncomfortable so from the employer's perspective we'll complete this section so we'll just assume that employee that employee Forest bomb over is paid every two weeks and then the date that payments will be sent we'll say we'll send payments to the on the first of the month beginning on so this is pretty much what you would complete as the employer as the taxpayer the taxpayer would fill out the right hand side checking as to whether or not they are unable to make debit payments so and then right below that is information about the kinds of taxes that the taxpayer is responsible for so if you go to the instructions for the taxpayer then basically it spells out all the things that should be completed If you're receiving this form from the IRS the odds are likely that the IRS employee probably filled a lot of information in to include the amount of money being deducted and the periodicity so and probably the collections information for up here so we'll assume that they did not do that and that the tax is being collected are from previously filed IRS form 1040s individual tax returns we'll assume that this is from tax years 2019 to 2021 as of we'll complete a mystery date we'll just say May 1st 2023 the taxpayer owed fifty thousand dollars and then applicable penalties of Interest and then the taxpayer is also a testing that they're being paid on the same schedule that the employer states that they're being paid so this probably will be complete filled in already so as the taxpayer I agree to have let's call it a rule of thumb that this type of agreement should be paid off over 72 months so let's just say that the taxpayer committed to paying eight hundred dollars uh every uh two weeks the beginning on and paid by the employer to the IRS until the total tax bill is paid in full and then uh for an existing agreement then the IRS Revenue officer may have inserted either a date of increase which is most likely let's bump up those payments and get this tax bill paid off uh probably not a decrease unless there's a significant reduction in the balance like if you uh you know paid a a significant chunk of money and greatly reduced your tax balance as you know part of refinancing your house you've got some extra money you decided to pay this down but now in exchange for doing that you need to reduce your monthly payments so that you can then have those monthly the the additional money going over to to the mortgage side of the ledger so you could say that I'm requesting a requie increase decrease in 2023 in July we'll say um minus two hundred dollars so the starting the new installment agree uh agreement amount would be six hundred dollars so now if there are additional terms this would be input by the IRS Revenue officer and then you and your spouse taxpayers would sign right here on the form if there's a title then you would have you know you would enter the title plus the date so this is the form the copy of the form that goes to the IRS which is identical to the taxpayers version of the form and then finally the employer's version all three of those are the same a couple of Keynotes to go over while we're reviewing this document so this is under the terms of agreement in the fine print that you might not want to read but we'll kind of summarize everything so basically it's stating that if that that the taxpayer is going to make each payment so that the IRS receives it by the due date on the front of the form so if the taxpayer cannot make the the payment or there's an additional tax bill that they accrue then they need to cut then you need to contact the IRS the agreement is based on your Current financial condition the IRS can modify or terminate the agreement if your ability to pay has significantly changed and you may need to provide updated financial information so for example if the IRS catches when that you're earning a lot more money and you can pay this down sooner rather than later but probably reach out to you like for example if you're in the middle of an agreement and you've consistently filed your tax returns and you've your adjusted gross income has always been a hundred thousand dollars and your most recent tax return filed and processed shows that your AGI is now two hundred thousand dollars you can probably expect some correspondence from the IRS asking you to step up your payments and you'll probably receive a copy of form 2159 that's been pre-filled by the revenue officer so so and the IRS does reserve the right to terminate your current installment agreement if you don't make your installment payments if you're not paying down your tax debts when due or if the IRS reaches out to ask you for updated financial information and you turn around and don't give it to them then they can terminate them this installment agreement and you're back in the situation that you're in without an installment agreement as long as an installment agreement is in place the IRS cannot take further collection action against you but once that installment agreement is terminated then the clock starts running and you may be subject to an escalation of collection actions so some of the other terms of agreement any tax refunds that you would normally receive or any overpayments of your tax bill they're going to be applied to an outstanding balance until you've paid your balance all the way down so if you owe fifty thousand dollars and then you're expecting a five thousand dollar refund don't expect that refund instead you should expect your balance to go down to forty five thousand dollars uh then there is a user fee that most uh taxpayers may have to pay it's generally 225 dollars you may be eligible for a reduced user fee of 43 dollars that may be waived or reimbursed this is a reduced fee for low income taxpayers so if you think you meet the criteria to qualify under the IRS low income taxpayer guideline which is at or below 250 percent of the poverty guidelines which are updated annually by the Department of Health and Human Services if you believe that your income is at or below that threshold then you should look at IRS form 13844 for more information about how you could qualify for that if you default on your installment agreement and the IRS terminates it as a result then you have to pay an 89 reinstatement fee again for low income taxpayers you may be eligible for a reduced fee of 43 dollars that may be waived or reimbursed if you meet certain conditions and the IRS reserves the authority to deduct this fee from your first payment so they're going to get this money um I generally the IRS applies payments in order of oldest debt going forward uh specifically if you have tax debt that is say five years old and then you have tax debt from two years ago you're going to be paying down your old balance first if the IRS terminates your agreement then as I previously mentioned they can start going back to collection efforts this might include loving your income bank accounts other assets seizing property you should receive a notice from the IRS prior to terminating your agreement so you should not expect to be completely blindsided if for some reason you terminate your agreement is terminated without notice then you should call the taxpayer Advocate to see what happened there may be either an explanation or you might have you might have caught the IRS doing something out of order and the taxpayer Advocate can hold the revenue officer accountable let's see if the IRS feels that their ability to keep collecting this tax is in Jeopardy they can terminate this agreement uh this agreement may need to be approved within the management levels of the IRS you can see that there is an IRS use box down below here so this is kind of internal language about when the statute for example the csed the statutory uh the collection statutory expiration date which is the date after which the IRS can no longer collect on a certain debt so there there's going to be a review to make sure that this is the appropriate Way Forward and specifically whether or not the IRS needs to file a notice of a federal tax lien so if you owe if you owe money above a certain threshold the IRS is required to place a federal tax lien on something that they can seize even if you've entered into and negotiated agreement so and that's described in depth in the internal revenue manual and then also finally by signing and submitting this form you're authorizing the IRS to contact third parties and to share your tax information in order to process and administer this agreement so thanks your employer things like that so uh like I said instructions to each individual or the business owner or on the back of each parties copy of the form so we just saw the instructions to the taxpayer which is on the back of part three the taxpayers copy there are instructions for the employer on the back of cop part two which is the employer's copy and that brings us to the conclusion of this video if you'd like to learn more about your payroll deduction agreement and how to set one up check out the article that we've written you can go to our website teachmepersonalfinance.com type in IRS form 2159 in the search bar in our article should appear if you like our articles please subscribe to our newsletter which you can opt into from any article on the website if you like our 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