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The Internal Revenue Service (IRS) has announced some changes to its collections processes to assist taxpayers who have been impacted by COVID-19. Specifically, the IRS says it is expanding taxpayer options for making payments and alternatives to resolve balances owed.
“The IRS understands that many taxpayers face challenges, and we’re working hard to help people facing issues paying their tax bills,” said IRS Commissioner Chuck Rettig. “Following up on our People First Initiative earlier this year, this next phase of our efforts will help with further taxpayer relief efforts.”
“We want people to know our IRS employees are committed to continue helping taxpayers wherever possible, including offering many options for those struggling to pay their tax bills,” said Darren Guillot, the IRS Small Business/Self-Employed Deputy Commissioner for Collection and Operations Support.
The new IRS Taxpayer Relief Initiative makes a few changes to collection procedures during COVID.
Payment Plan Extensions
Currently, the IRS offers short-term and long-term payment plans, including installment agreements that you can apply for online. Online applications are generally available to individuals who owe $50,000 or less in combined income tax, penalties and interest or businesses that owe $25,000 or less combined that have filed all tax returns (if you’re over those amounts, you can still enter into an agreement but you’ll have to talk to someone over the phone). The short-term payment plans are free – there’s no free to set it up – but typically must be paid in full in 120 days. Under the new IRS Taxpayer Relief Initiative, that deadline will be extended to 180 days for certain taxpayers.
Less Documentation For Installment Agreements
Setting up installment agreements can require a lot of paperwork. Now, the IRS says that certain qualified individual taxpayers who owe less than $250,000 may set them up without providing a financial statement or substantiation if their monthly payment proposal is sufficient.
No Tax Lien Notice Necessary For Certain Installment Agreements
Procedure is typically important when it comes to IRS and installment agreements. For now, some individual taxpayers who only owe for the 2019 tax year and who owe less than $250,000 may qualify to set up an installment agreement without a notice of federal tax lien filed by the IRS.
Tax Liabilities Automatically Added
The IRS will also now automatically add certain new tax balances to existing Installment Agreements, for individual and out of business taxpayers. I know this doesn’t sound like a good thing, but it is. You can put your installment agreement in jeopardy if you don’t pay your taxes, including new balances. It can be tough to keep track when you can barely keep your head above water, so by adding the new balances into the mix, the IRS says this “taxpayer-friendly approach” will help some taxpayers avoid default.
Online Opportunities To Make Changes
Once you have an existing installment agreement, you typically have to talk to the IRS to make changes. Now, qualified taxpayers with installment agreements paid by direct debit may now be able to make changes online, including proposing lower monthly payment amounts and changing their payment due dates.
More Flexibility For Offers In Compromise
An Offer in Compromise allows you to settle your tax debt for less than the full amount you owe. The IRS considers a host of circumstances including the ability to pay; income; expenses; and asset equity. Generally, the IRS will only agree to an OIC if they determine they will not be able to collect the amount due within a reasonable period of time. This option shouldn’t be your first choice (and please don’t believe those TV commercials that swear you’ll be able to settle your tax bill for pennies on the dollar).
While you can apply for an OIC on your own, consider a tax professional. If, however, you opt to try it yourself, use the IRS’ Pre-Qualifier online tool to see if you qualify and to calculate a preliminary offer amount.
For taxpayers with existing OICs who are temporarily unable to meet the payment terms, the IRS says it will be “offering additional flexibility.”
Temporary Delays In Collection
The IRS may be able to temporarily delay collections – but you have to ask. This typically happens by having your account marked as “currently not collectible.” But be careful: being currently not collectible does not mean the debt goes away, it means the IRS has determined you cannot afford to pay the debt at this time. You can find out more here.
Reasonable Cause Relief From Penalties
If you have have reasonable cause for failing to file, pay and deposit on time, you may qualify for penalty relief. Those reasons include natural disasters, inability to obtain records, or death, serious illness, incapacitation or unavoidable absence affecting you or your immediate family. Not having enough money is generally not enough – on its own – to qualify. You can find out more about penalty relief here.
First-time penalty abatement relief is also available for taxpayers.
More Information
Taxpayers can find out more by going to the IRS website at IRS.gov.
“If you’re having a tax issue, don’t go silent. Please don’t ignore the notice arriving in your mailbox,” Guillot said. “These problems don’t get better with time. We understand tax issues and know that dealing with the IRS can be intimidating, but our employees really are here to help.”