IRS Suspends Collections: The Ideal Time to Tackle Tax Issues
IRS enforcement is largely on hold. If you have tax problems, you may be tempted to wait and see if your tax issues will escape notice. But there are several reasons to resolve your tax issues now and not wait for the IRS to begin collections again.
First, the IRS may still take collection action in some cases. While the IRS has suspended action on most cases, each announcement of suspension has included the caveat that they may continue to take action where the time in which the IRS may collect back taxes is about to expire. . Generally, the IRS has 3 years from the filing of a tax return (or from the due date for taxes if no return is filed) to conduct an audit and assess additional taxes.. Once a tax is assessed, the IRS then has an additional ten years to collect delinquent amounts. Each announcement has also included a caveat for “jeopardy,” or when there is substantial risk to potential collection of taxes. So for some taxpayers, collection action has not been suspended by the IRS and many taxpayers will not know if they fall into one of these caveats.
Second, taxpayers who owe delinquent taxes can usually avoid unnecessary enforcement actions by getting out ahead of the issues. The key is for you to file with the IRS before the IRS comes after you. Be aware that preparing to file can take more time than you expect. If you have unfiled returns, it will take time to gather the necessary information, especially if you failed to file for multiple years. It will also take time for your accountant or tax preparer to review your information and properly prepare your tax returns. If you already have existing delinquent taxes, you will not qualify for a resolution until you are compliant with all filing requirements. Taxpayers remain exposed to potential levies, liens or other collection actions while they are trying to get the necessary returns prepared and filed. Taxpayers can minimize their exposure by using this window of opportunity to get compliant, putting the taxpayer in the right position to enter a formal resolution and avoid unnecessary and potentially harmful collections.
Third and finally, if you can take advantage of this time to position yourself for the best possible resolution of your tax liabilities. If you qualify for the Offer in Compromise program, you can use this time to gather the necessary documents and
information and get your offer submitted.
The IRS will not process the offer, but you would be in line based on the postmark date. And without the pressure of active enforcement, you can work with your tax professional to submit the most complete offer possible. The more complete and thorough documentation is when an offer is submitted, the more likely it is to be accepted and accepted more quickly.
If you do not qualify, or an offer is not in your best interest, you may still qualify for hardship. This means that your case may be placed into a Currently Not Collectible status. In such instances, the IRS agrees you either can’t pay, or can only afford a partial payment based on your financial ability, not the total amount owed.
Even if you do not qualify for an offer or hardship, many of the IRS’s options for installment agreements are based on the total amount owed. Whether or not the IRS will file a tax lien depends on the total amount owed as well. You can potentially address a portion of your balances to meet these thresholds.
Don’t waste this opportunity to put yourself in the best position when it comes to your tax debts. Talk to a tax professional and find out what options are available to you before the IRS resumes collection activity, which is currently scheduled for July 15, 2020.