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Part 5. Collecting Process

Chapter 5. Insolvencies, Decedents Estates and Estate Taxes

Section 6. Estate Tax Installments

5.5.6  Estate Tax Installments

5.5.6.1  (06-23-2005)
Estate Tax Installment Cases (Section Overview)

  1. This section contains background information and procedures for Collection employees who must perform actions on Internal Revenue Code (IRC) § 6166 Estate Tax Installment Cases.

  2. IRC § 6166 provides an extension of time to pay Form 706 estate tax in two or more, but not exceeding 10, equal installments. It allows heirs a fourteen year period to pay estate tax attributable to an estate’s interest in a closely held business. It grants the estate a deferral period to make "interest only" payments for the first four years.

  3. The prolonged IRC § 6166 estate tax installment plans are approved by Campus non-collection functions and most are successfully completed with no collection function involvement. They should not be confused with the one year IRC § 6161 Extensions of Time to Pay Estate Taxes which are approved by Compliance. (See IRM 5.5.5)

5.5.6.2  (06-23-2005)
Service Actions to Ensure Payment When Granting Installment Privileges

  1. The laws granting the Estate Tax Installment Election provide the Service certain options to secure eventual payment. These options include:

    1. Requiring the estate to furnish a performance bond in an amount equal to the estate tax and interest being deferred.

    2. Allowing the estate to substitute the filing of a special lien under IRC § 6324A (Form 668J) pledging their right, title, and interest to specific property to the government.

      Note:

      IRM 5.5.8 contains a complete explanation of bond and special lien procedures.

5.5.6.3  (06-23-2005)
Service Actions on Estate Tax Installment Cases (Potential Default)

  1. When an estate doesn’t pay or underpays an installment (IRC § 6166), a letter is issued by the Cincinnati Campus to inform them to catch up or lose their installment privilege.

    If Then
    no payment is received after informational notice account is referred to Compliance Services Collection Operations (CSCO) for a phone call
    CSCO actions do not result in payment of the delinquent amount CSCO prepares a Form 2209 OI and forwards it to Technical Services Advisory (Advisory)
    no current extension is found in Advisory files Advisory retains a memo copy and forwards the Form 2209 to a Revenue Officer group for contact

    The OI should be clearly marked "Potential installment privilege default under IRC § 6166 or §  6166A."

5.5.6.4  (06-23-2005)
Potential Default on Installment Cases (CSCO) Actions

  1. Form 2209, Courtesy Investigation, is received from Accounting Department when an estate tax case granted the installment privilege becomes delinquent.

  2. Attempt at least two telephone calls to the executor or representative within 10 days of receipt.

  3. If contact is made:

    1. Demand payment of the delinquent installment,

    2. Advise the representative that failure to make the installment payments will result in loss of the installment privilege with the full amount of the liability, plus interest and any applicable penalties, becoming payable,

    3. Control the Form 2209 and show in the activity code the reason for suspension,

    4. Suspend the case for 45 days to wait for a response or payment,

    5. After 45 days, check IDRS for payment. If payment was made and/or response was received; close the control base, activity code "CLTOACCT" , and send Form 2209 to Accounting.

    6. If payment and/or response not received, complete "To" section of Form 2209 send to Technical Services Advisory. Close the control base, update activity code "CLTODOTS" . Show which area office will be receiving Form 2209.

  4. If unable to make contact:

    1. Complete "To" section of Form 2209 and send it to Technical Services Advisory

    2. Close the control base, and update activity code to "CLTODOTS" with area office who will be receiving Form 2209.

5.5.6.5  (06-23-2005)
Revenue Officer Actions on Installment Cases (Potential Default)

  1. Installment Privilege OI’s must be completed within the original time specified on the OI.

  2. Contact the representative to collect the missing installment. Add the following to the missing installment amount:

    1. failure to pay penalty (see IRC § 6651(a)(2))

    2. interest at the IRC § 6621 rate, and

    3. a late installment penalty of 5% per month on the total payment due plus interest (see IRC § 6166(g)(3)(iii)).

    (When the tax and interest is paid within six months of the payment due date, the entire balance will not be accelerated due to non payment of the late payment and late installment penalty.)

  3. Take the following actions to resolve the OI:

    If Then
    full amount of installment is paid process payment and close OI to Advisory
    installment cannot be secured within 15 days close the OI, record the attempts made to secure payments on OI

    (The IRC provides a six month grace period for late estate tax installments. This period is usually past before an investigation reaches the field. Close the investigation as soon as you determine that the estate cannot make the missing installment or the representative cannot be contacted.


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