IRS Form 2159 Explained
IRS Form 2159 Explained
IRS Form 2159 is one of the tax forms that can be used to set up an installment agreement with the IRS to help pay their back taxes.
Table of Contents
Key Takeaways:
- IRS Form 2159, Payroll Deduction Agreement, is a tax document to set up an installment agreement, a form of tax debt relief that allows taxpayers to make monthly payments on their federal tax debt by having funds withheld from their paychecks and sent directly to the IRS.
- Taxpayers can use IRS Form 2159 to organize a voluntary payroll deduction agreement with the IRS, make payments to reduce their federal tax debt, and prevent receiving a Notice of Intent to Levy in the mail and having their assets seized.
- There are three copies of the 2159 form that are essentially the same: the acknowledgment copy must be returned to the IRS for processing, and there is also a copy of the form for the employer and the employee.
What Is IRS Form 2159?
IRS Form 2159, Payroll Deduction Agreement, is a tax document used to establish an agreement between the employer, the employee, and the IRS in the case that the employee has unpaid federal tax debt.
Taxpayers can use IRS Form 2159 to set up an installment agreement, allowing them to make monthly payments to the IRS by withholding funds from their paychecks. This achieves a similar result to submitting the monthly payments using the direct deposit from their bank accounts to pay down their tax liability, but instead by withholding the funds directly from their wages.
Taxpayers can file IRS Form 2159 to:
- Organize a voluntary payroll deduction agreement with the IRS
- Make payments to reduce their federal tax debt with the IRS Forgiveness Program
- Prevent receiving a Notice of Intent to Levy in the mail and having their assets seized
Payroll Deduction Agreement Vs. Wage Garnishment
A payroll deduction agreement and a wage garnishment involve the employer withholding funds from an employee’s wages and sending the money directly to the IRS. However, while payroll deduction agreements request that employers comply with the process of withholding a specified amount from the employee’s paycheck and depositing it to the IRS, the employer has the right to refuse to participate. In contrast, wage garnishment orders are mandatory when ordered by the IRS.
IRS Form 2159 Instructions
There are three copies of the 2159 form that are essentially the same: the acknowledgment copy must be returned to the IRS for processing, and there is also a copy of the form for the employer and the employee.
Top Section
The top section of IRS Form 2159 is where all taxpayer and employer information must be listed.
The employer information that must be recorded includes the employer’s name, address, point of contact in the company, telephone number, payroll schedule (weekly, biweekly, monthly, or other), date of first payment, signature, title, and date.
The taxpayer information that must be reported in the top section includes their name, address, full Social Security number (SSN) or employer identification number (EIN), the last four digits of their spouse’s SSN or EIN, and if they can make debit payments toward their tax debt.
The last part of this section allows the taxpayer to provide details about the income tax return, including which tax form is used, the tax periods this payment request involves, and how much taxes are currently owed.
Middle Section
The middle section of the 2159 payroll deduction form is where taxpayers provide information about how frequently they are paid, how much they wish to pay in their installment agreement each month, the date of the first payment, and if this monthly payment amount will increase or decrease.
Terms of Agreement Section
The terms of agreement section of IRS Form 2159 does not require input from the filer, but it does provide information such as:
- A warning that the IRS can modify or terminate the installment agreement if the taxpayer fails to make payments, does not stay up to date with filing their tax returns or fails to update the IRS with financial information when asked.
- Taxpayers are unlikely to receive tax refunds while paying for their tax debt through an installment agreement.
- There is a one-time user fee of $225 when initiating an installment agreement, but low-income taxpayers may meet the qualifications for a reduced or waived fee.
- The only way to 100% guarantee taxpayers won’t be faced with a federal tax lien is to pay off their full tax liability.
Signature Section
In the signature section, the taxpayer must sign and date the form, and so must their spouse if their filing status is to file jointly. If a partner or corporate officer is the one who filed on behalf of a business, the title must be included.
There are several ways to lower what you owe in taxes, including finding out which of your earned income is tax-exempt, and maximizing your standardized and itemized deductions. If you need further clarification about filing your taxes, including determining which tax credits and tax deductions you qualify for, the experts at Ideal Tax can help you navigate the guidelines outlined by IRS.gov.
Luis serves as the Director of Operations for Ideal Tax, overseeing a multifaceted team including case management, tax professionals, document specialists, customer support, training, and development.
