Common use of Treas Clause in Contracts

Treas. Reg. § 301.7122-1(c)(2)(i). 27 IRM 5.15.1.7 (Oct. 2, 2012). Nearly 300,000 taxpayer accounts that should have qualified for currently not collectible status … (69 percent) are being resolved by the taxpayer making payments, not because of abatements by the IRS or offsets of the taxpayers’ refunds, indicating that the taxpayers are paying their accounts despite having total positive income less than Allowable Living Expenses, suggesting the taxpayers are prioritizing paying the IRS over meeting their necessary living expenses. consider necessary to function in today’s society. For example, the IRS considers childcare to be an “other expense” rather than a necessary expense, even where both parents are employed full time, thus leaving it to the determination of the individual IRS employee as to whether the expense will be considered necessary.28 It would be counter-productive for this expense to be disallowed where both parents are working and would be better able to pay their tax liability with two incomes.29 TAS research suggests that the IRS is placing taxpayers into IAs where their total positive income (TPI) is less than their ALEs. Taxpayers may agree to an IA they can’t afford out of fear of the IRS, a misunderstanding of the options available, or out of obligation to repay their debts at any costs. Nearly 300,000 taxpayer accounts that should have qualified for currently not collectible (CNC) status had entered into installment agreements in calendar year 2014 despite their income being below the IRS ALEs.30 These taxpayer accounts (69 percent) are being resolved by the taxpayer making payments, not because of abatements by the IRS or offsets of the taxpayers’ refunds, indicating that the taxpayers are paying their accounts despite having TPI less than ALEs, suggesting the taxpayers are prioritizing paying the IRS over meeting their necessary living expenses.31 By the IRS’s definition, taxpayers who cannot meet their necessary living expenses are experiencing economic hardship.32 These taxpayers would therefore qualify for a mandatory release of an IRS levy, yet the IRS accepts IAs from these taxpayers despite the payments causing economic hardship.33 Additionally, TAS research found higher default rates for taxpayers with TPI less than ALEs. Taxpayers with TPI less than ALEs and balances due of $1,001 to $10,000 who entered into IAs in FY 2014 defaulted at a rate of nearly 25 percent by FY 2016, compared to an overall default rate in this income category of less than 23 percent. Similarly, taxpayers with TPI less than ALEs and balances due of greater than $10,000 who entered into IAs in FY 2014 defaulted at a rate of almost 43 percent by FY 2016 compared to an overall default rate in this category of less than 38 percent.34 28 IRM 5.15.1.10(3), Other Expenses (Nov. 17, 2014). 29 The latest Census Bureau Report found that nearly 33 percent of children age five and under in 2011 were in non-relative care. Census Bureau, Who’s Minding the Children? (Apr. 2013).

Treas. Reg. § 301.7122-1(c)(2)(i). 27 IRM 5.15.1.7 (Oct. 2, 2012). Nearly 300,000 taxpayer accounts that should have qualified for currently not collectible status … (69 percent) are being resolved by the taxpayer making payments, not because of abatements by the IRS or offsets of the taxpayers’ refunds, indicating that the taxpayers are paying their accounts despite having total positive income less than Allowable Living Expenses, suggesting the taxpayers are prioritizing paying the IRS over meeting their necessary living expenses. consider necessary to function in today’s societysociety . For example, the IRS considers childcare to be an “other expense” rather than a necessary expense, even where both parents are employed full time, thus leaving it to the determination of the individual IRS employee as to whether the expense will be considered necessary.28 necessary .28 It would be counter-productive for this expense to be disallowed where both parents are working and would be better able to pay their tax liability with two incomes.29 incomes .29 TAS research suggests that the IRS is placing taxpayers into IAs where their total positive income (TPI) is less than their ALEsALEs . Taxpayers may agree to an IA they can’t afford out of fear of the IRS, a misunderstanding of the options available, or out of obligation to repay their debts at any costscosts . Nearly 300,000 taxpayer accounts that should have qualified for currently not collectible (CNC) status had entered into installment agreements in calendar year 2014 despite their income being below the IRS ALEs.30 ALEs .30 These taxpayer accounts (69 percent) are being resolved by the taxpayer making payments, not because of abatements by the IRS or offsets of the taxpayers’ refunds, indicating that the taxpayers are paying their accounts despite having TPI less than ALEs, suggesting the taxpayers are prioritizing paying the IRS over meeting their necessary living expenses.31 expenses .31 By the IRS’s definition, taxpayers who cannot meet their necessary living expenses are experiencing economic hardship.32 hardship .32 These taxpayers would therefore qualify for a mandatory release of an IRS levy, yet the IRS accepts IAs from these taxpayers despite the payments causing economic hardship.33 hardship .33 Additionally, TAS research found higher default rates for taxpayers with TPI less than ALEsALEs . Taxpayers with TPI less than ALEs and balances due of $1,001 to $10,000 who entered into IAs in FY 2014 defaulted at a rate of nearly 25 percent by FY 2016, compared to an overall default rate in this income category of less than 23 percentpercent . Similarly, taxpayers with TPI less than ALEs and balances due of greater than $10,000 who entered into IAs in FY 2014 defaulted at a rate of almost 43 percent by FY 2016 compared to an overall default rate in this category of less than 38 percent.34 percent .34 28 IRM 5.15.1.10(3), Other Expenses (Nov. 17, 2014). 29 The latest Census Bureau Report found that nearly 33 percent of children age five and under in 2011 were in non-relative care. Census Bureau, Who’s Minding the Children? (Apr. 2013).