It’s undeniable: COVID-19 (commonly referred to as coronavirus) is impacting almost every aspect of our lives right now. And while its effects are overwhelmingly negative, we are continuing to see a sweep of positive relief efforts come through. From COVID-19 student loan relief to tax extensions, steps are being taken every day to help Americans get through this crisis.
On March 25, 2020, the IRS announced its People First Initiative, which encompasses many steps to provide COVID-19 tax debt relief to taxpayers across the country. In addition to the extension of Tax Day to July 15, 2020, the IRS wants to offer taxpayers relief for tax debt. Here is what some of those relief steps look like.
Offer in Compromise (OIC) assistance
An Offer in Compromise (OIC) from the IRS is already a tricky program to qualify and apply for. This settlement agreement with the IRS (that could allow you to settle your debt for less than you owe) is highly desirable by those burdened with tax debt for obvious reasons. Whether you’re waiting for a response to your OIC application or you already have an OIC, the IRS has a few COVID-19 tax debt relief steps in place now.
Already have an Offer in Compromise
If you’ve already had your OIC accepted by the IRS, you now have the option to suspend your payments until July 15, 2020. Interest will continue to accrue on your unpaid balance though. You’ll need to pay that additional interest in order to settle your tax debt.
If you have an OIC and are delinquent in filing your 2018 tax return, the IRS will not automatically default your OIC. Just make sure you file your delinquent 2018 return and your 2019 return by July 15, 2020.
Waiting on a pending OIC application
If you need to provide any additional information to support your OIC at the IRS’s request, you now have until July 15. Any pending OIC requests will not be closed before July 15, unless the IRS has the taxpayer’s consent.
Installment Agreement payment suspension
If you’re on an Installment Agreement with the IRS and are struggling to make payments during this hectic time, there’s good news. Payments for Installment Agreements are suspended between April 1 and July 15, 2020. On a Direct Deposit Installment Agreement? You have the option to suspend your payments during this time period if you prefer. Keep in mind though that interest will continue to accrue on your unpaid tax debt balance.
The IRS has also stated that it will not default any Installment Agreements during this time period.
Postponement on certain collection activities
IRS tax liens and levies, either automated or initiated by a field revenue officer, will be suspended. It’s important to note that field revenue officers may still continue pursuing non-filers with high incomes.
The IRS will also not be forwarding any new delinquent tax accounts to their private debt collection agencies until July 15.
Halt on new passport certifications
Typically, the IRS will send certifications for seriously delinquent taxpayers to the Department of State, which can prevent taxpayers from receiving or renewing passports. During this time period though, the IRS will not be sending new certifications.
Encouragement of filing delinquent returns now
If you’ve missed filing any returns before 2019, now might be the perfect time to file. The IRS claims that “more than 1 million households that haven’t filed tax returns during the last three years are actually owed refunds.” For those households, filing now could mean getting those refunds that you otherwise would have lost.
Additionally, the stimulus package currently in progress will likely base government assistance on previous tax returns. If you haven’t filed your previous returns, you may not be eligible for assistance.
Delinquent returns can be tricky to file. So, it may be in your best interest to use a tax professional who can help you file responsibly.
Responsible adjustments to audits
When it comes to audits (field, office, or correspondence), the IRS has said that it “will generally not start” these examinations during this time period. However, the IRS may start new audits as it deems necessary.
Any in-person meetings for audits are suspended. If an audit is already underway, be sure to continue sending any information that the IRS requests. The IRS examiner on your audit will likely continue to work remotely.
For businesses and corporations, the IRS has stated that it will be considerate with staffing concerns. For instance, say the IRS is currently auditing a business. The business owner would prefer to begin the examination now as they currently have the staff and records available. The IRS may then move forward with its audit. This would happen with the understanding that COVID-19 occurrences may affect future work on the examination.
Appeals will not stop
If you currently have an IRS appeal in progress, don’t worry. The IRS has assured taxpayers that their appeals employees are continuing to work their cases. They will not be holding in-person conferences, but they are continuing to communicate over the phone or via videoconference.
Options for those dealing with tax debt
In this uncertain time, the IRS is reminding taxpayers who are delinquent that they have options if they’re struggling with tax debt. If you’re dealing with delinquent tax debt, you should take this time period to explore the tax relief options available to you through the Fresh Start Initiative.
Our experienced tax professionals can walk you through all the options available to you. We can even work with the IRS on your behalf. And with everything going on in the world right now, even the IRS has admitted that its wait times over the phone may be longer. Lately, their phone lines have been impossible to connect to. Why not have our team get your tax debt ducks in a row and deal with those hold times for you?
As more COVID-19 tax debt relief updates come in from the IRS, we’ll keep you informed and updated.
This blog post was last edited on March 25, 2020.