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Form 2159

If an employer agrees and signs up to mail in the deductions is there a way to stop that agreement? Or do they need to keep participating in the deductions until the debt is satisfied. I think the 2159 is voluntary to begin with not sure after it has been started.

Comments

  • There does not appear to be a clear path to withdrawing from a 2159 agreement. The instructions to the employer state "The amount of the liability shown on the form may not include all penalties and interest provided by law. Please continue to make payments unless IRS notifies you to stop." There are a couple of concerns - If the employer withdraws prior to receiving a notice from the IRS, this could cause problems for the employee if the full amount has not been repaid. On the other hand, if the employer continues payments after the full amount has been paid but there was no notice from the IRS, the employee then has to recover the overpayments from the IRS.

    However, it would seem that the IRS views the 2159 agreement as a useful tool and that it would not want to make that tool less attractive to employers by making it difficult for them to withdraw if it is causing difficulty for the employer. Since there does not seem to be a formal process, contact the IRS (phone numbers included in Form 2159 instructions to employer) and ask what needs to happen.

    Coordination with the IRS and the employee to change the employee's installment agreement might be a good approach. For example, a mutual agreement to a transition from payroll deduction to a direct debit from the employee's bank account. You just don't want the IRS and employee asking why you suddenly stopped making payments that were agreed upon.