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Need Help With Your Tax Bills? The IRS Is Expanding Resolution Options During The Pandemic

Need Help With Your Tax Bills? The IRS Is Expanding Resolution Options During The Pandemic

Though people may have an overall negative impression of the Internal Revenue Service (IRS), the agency is a valuable part of the federal government that is there to serve the public. In recognition of the significant economic challenges posed by the pandemic, the IRS has announced a variety of modifications specifically designed to help taxpayers who owe money or are having difficulties in meeting their payment obligations.

Speaking of the need for empathy, IRS Commissioner Chuck Rettig said, "The IRS understands that many taxpayers face challenges, and we're working hard to help people facing issues paying their tax bills. Following up on our People First Initiative earlier this year, this next phase of our efforts will help with further taxpayer relief efforts."

The changes introduced by the IRS Taxpayer Relief Initiative include:

Postponing Collection Temporarily

One of the most common concerns voiced by taxpayers has to do with making payments, and the IRS has announced that it is willing to temporarily delay collections for anybody that requests such a change. Though this will not discharge the debt, once the IRS agrees that you can’t currently make payments your account will be marked “currently not collectible.” Those who will benefit from this program can learn more by clicking here.

Greater Flexibility for Offers in Compromise

Even before the global pandemic, taxpayers who were unable to pay their tax liabilities were able to reach a settlement called an Offer in Compromise that allowed them to pay a reduced amount based on supplying information that demonstrated their inability to pay (usually income, expenses and asset equity). As was true in the past, determinations about eligibility for an OIC will be based on how long it is likely to take for debt to the IRS to be paid, and in light of the pandemic the IRS has announced that they will be more flexible. Pursuing an OIC is best done with the help of a tax professional, though the agency makes an online tool available for individuals to determine whether they would be eligible and to forecast what their payment would be.

If you are already paying off an Offer in Compromise and have found yourself struggling to meet your obligation, the agency has indicated greater flexibility in that area as well.

Extensions for Payment Plans

The IRS has traditionally made short-term and long-term payment plans available for taxpayers who are unable to pay their liabilities immediately and who do not owe large amounts.  The categories of taxpayers that are eligible for these plans include:

  • Individual taxpayers that have filed all tax returns and owe $50,000 or less in combined income tax, penalties and interest
  • Businesses that have filed all tax returns and owe $25,000 or less

Those taxpayers that fall into one of these categories can apply for one of these plans can do so done online, and those whose liabilities are greater may still be eligible for payment plans, but will need to discuss setting an agreement up in a phone conversation. These plans are available without additional fees. Where previously payment plans have terms requiring payment in full within 120 days, an additional 60 days may be provided under the IRS Taxpayer Relief Initiative.

Less Paperwork and No Tax Lien Requirement for Installment Agreements

One of the most frustrating aspects of setting up a payment plan with the IRS has traditionally been the mountain of paperwork that the agency has required. Taxpayers who qualify and who owe under $250,000 may find that particular headache eliminated, as the agency has indicated that if their proposed monthly payment is adequate, they will no longer need to document their request with financial statements or other proof. Similarly, those whose liability is limited to the 2019 tax year and who owe less than $250,000 will no longer need to provide a notice of federal tax lien in order to qualify for an installment agreement.

Existing Installment Agreements Will See New Liabilities Automatically Added

When a taxpayer establishes an installment agreement, they agree that the plan will be considered in default if they don’t remain current on their new tax liabilities. During the period of the pandemic, the IRS is recognizing that taxpayers may not be able to keep up with current tax balances as well as with installment plans, so they will take what they are calling a “taxpayer-friendly approach” and simply adding new balances to existing agreements for the time being.

Modifications to Installment Agreements Can be Made Online

In an attempt to minimize additional headaches and the need for time-consuming documentation, the agency is permitting those who already have installment agreements including direct debits to request modifications online. Eligible modifications include reducing monthly remittances or adjusting the date by which payments are due.

Relief from Penalties for Reasonable Failures to Pay

Though penalties are typically imposed for failure to pay, file or make deposits by the established deadline, taxpayers who are affected by circumstances outside of their control (such as inability to obtain records, death or serious illness, capacity, natural disaster or unavoidable absence affecting them or their family) will be able to seek relief based on reasonable cause. In order to find out if you qualify, click here. Taxpayers who have never missed a payment before may also be eligible for penalty abatement relief.

To Learn More

The relief being offered in response to COVID-19 is far reaching, and taxpayers who need help can learn more by contacting their tax professional or visiting the IRS website, IRS.gov.

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Spencer Wilson

Spencer Wilson

Spencer Wilson, EA is a tax preparer based in Long Beach, CA. Spencer Wilson Financial Management Services has been serving the Greater Los Angeles Area and Orange County since 2004. <br /> We began in the heart of Naples in Long Beach and we continue to work hard offering tax preparation and planning, business accounting and bookkeeping and payroll services . <br /> We have helped many different people and businesses succeed financially and take control over their finances.

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