First, in an effort to protect both their employees and the public, the IRS announced that it would be limiting all in-person contact. For taxpayers who owe a delinquent liability, this means there is less likely to be a knock at the door from the IRS. That is likely a big relief to many since the IRS announced prior to the pandemic that they would be visiting more high income taxpayers who were delinquent. However, the language states that field officers will continue to pursue delinquent returns, so taxpayers can still expect notices and demands for information.
But the IRS didn’t stop at social distancing efforts. They are also offering some relief for taxpayers with delinquent tax liabilities.
Taxpayer who are currently in installment agreements with the IRS will have their payments due between April and July 15, 2020, suspended. The release indicated that taxpayers may choose to suspend payments, so it may be necessary to contact the collections department, especially if payments are set up for direct debit or payroll deduction. However, the language also states that the IRS will not default any agreement during this period. I would expect more information on this in the next few days. It is important to note that interest will continue to accrue on any outstanding balances.
The Offer in Compromise program is also relaxing some of its procedures during this period. The IRS is giving any taxpayer with a pending offer until July 15, 2020, to provide any requested additional information and has committed that it will not involuntarily close any pending offer until that date. For offers that have already been accepted, the IRS will allow a taxpayer the option of suspending payments due until July 15, 2020. Again, the “option” wording in their release seems to indicate that contact with the offer monitoring unit may be necessary, and likely additional information on this process will be released with a few days. The IRS also will not default an offer for any taxpayer delinquent on their 2018 tax filing before July 15, 2020.
For those taxpayers who owe delinquent taxes and are not in an agreement with the IRS, the IRS will not issue liens or levies between April 1 and July 15, 2020, except where there is a statute of limitations approaching. This includes cases with both automated collections and through field offices. They will also stop forwarding delinquent accounts to private collection agencies during this period. This can provide a huge relief to many taxpayers.
IRS will not initiate any new audits unless necessary to protect the statute of limitations, but will generally continue review of any current audits with an understanding that accessing certain records or appropriate personnel may be a challenge.
In any case where the statute of limitations is imminent, the IRS may continue collection or audit efforts unless there is a waiver of the statute of limitations agreed upon by the taxpayer and the IRS.
As a tax professional, I recommend that taxpayers evaluate their situation and consult a professional if they are unsure on whether or how to take advantage of this initiative. It may be in a taxpayer’s best interest to suspend payments on an installment agreement or Offer in Compromise, but its not always. If a taxpayer can afford to pay now, there may be reasons to continue to do so. But for now, the IRS has offered some relief for those suffering in the current economic circumstances.
Disclaimer: The information contained in this blog and on this website are for informational purposes only and should not be interpreted to indicate a certain result will occur in your specific legal situation. The information contained in this post and on this site is not legal advice and does not create an attorney-client relationship. The Supreme Court of Illinois does not recognize certifications of specialties in the practice of law.