The IRS recently issued a new People First Initiative in response to the COVID-19 pandemic. The new People First initiative was established to provide immediate relief to taxpayers that face financial uncertainty over their taxes.
There’s a lot to consider when it comes to COVID-19 and its impact.
Existing Installment Agreements
For taxpayers that have existing installment agreements with the IRS, payments due between April 1 and July 15 will be suspended. However, interest will continue to accrue on the unpaid balances. Generally, if a taxpayer misses a payment, their installment agreement will default, but under the People First Initiative the IRS will not default the installment agreement if payments have not been made between April 1 through July 15, 2020.
What action do I need to take? If you have an existing installment agreement with the IRS, no further action is required at this time. If, however, you have a direct debit installment agreement, you may have to contact the IRS to request the payments be suspended.
Pending Offer in Compromises
For taxpayers that have pending offer in compromises with the IRS, the IRS will allow taxpayers additional time (to July 15, 2020) to provide any requested information. Generally, the IRS offer unit only allows taxpayers a small window of time (i.e., seven to 14 days) to provide them with additional information. If the information is not received within the specified due date, the offer will be closed and returned to the taxpayer. However, under this new initiative, the IRS is extending the time for taxpayers to provide any additional information to July 15, 2020. Starting April 1, 2020, the IRS will not close any pending offer in compromise requests before July 15, 2020, unless the taxpayer consents.
What action do I need to take? No action is needed at this time. However, you still must provide additional information by July 15, 2020.
Accepted Offer in Compromises
For taxpayers that have an accepted offer in compromise, the new initiative gives them the option to suspend all payments until July 15, 2020. Generally, when an offer is accepted, the taxpayer has the option of choosing a lump sum cash offer payment which allows a taxpayer five months to pay the remaining 80% of their offer amount (as 20% of the offer amount was paid at the time the offer was submitted to the IRS) or a short-term payment plan offer which allows a taxpayer 24 months to pay the accepted offer amount.
What action do I need to take? Regardless of how many payments the taxpayer has left, they do not have to make any payments from April 1, 2020 to July 15, 2020.
Additionally, for taxpayers that have an accepted offer in compromise, they must timely file and timely pay their taxes for the next five years (from the date their offer was accepted). If the taxpayer is not in filing compliance, their offer in compromise will default and the taxpayer will be responsible for all the tax, penalties and interest. However, under the new People First Initiative, the IRS will not default an offer in compromise for those taxpayers that have not timely filed their 2018 tax return. However, any unfiled 2018 returns must be filed by July 15, 2020. For 2019, if an extension is filed, taxpayers are protected until the extended due date of October 15, 2020. Otherwise, their accepted offer in compromise will default.
Accounts in Collections
Taxpayers that have not reached a resolution with the IRS for their unpaid taxes will eventually make their way to collections and be subject to enforced collection action. Depending on the type of tax due, the amount of the unpaid balances due, and how much time is left for the IRS to collect on the outstanding balances, a taxpayer may be assigned to a field office for collection.
Examples of cases that are transferred to the field are taxpayers with unpaid payroll taxes or those who have balances due above $250,000 and assigned to a Revenue Officer. A Revenue Officer has the authority to file federal tax liens to protect the government’s interest and issue levies (bank levy, account receivable levies, wage garnishments, etc.) to collect on the outstanding balances due.
Under the People First Initiative however, field Revenue Officers will not initiate liens and levies during the suspension period (April 1 to July 15). However, Revenue Officers will continue to pursue high-income non-filers.
For taxpayers that have not been transferred to the field office and remain with Automated Collections (ACS), the IRS will not be issuing new automatic or systematic liens or levies during the suspension period.
Also, under the People First Initiative, new delinquent accounts will not be forwarded to outside collection agencies; such as Pioneer, CRE Group, Performant, etc.
The IRS will generally not start any new field, office, or correspondence audits unless it is deemed necessary to preserve the statute of limitations. For any existing examinations, the IRS is suspending all in-person meetings, but the agents will continue to work remotely.
Keep Up to Date on Tax Controversy and Collections
COVID-19 has impacted the way everyone does business, including the IRS. The IRS is currently suspending collection operations to aid individuals affected by the economic downturn caused by coronavirus. It’s important, however, to realize that action will still need to be taken at the end of these suspension terms.
COVID-19’s impact on educational institutions is complicated.