You've been sheltering in place. You've applied for unemployment benefits.
And then there are your taxes.
Added COVID-19 tax considerations: Like just about everything during this global pandemic, taxes also are affected. There is, of course, the new July 15 Tax Day deadline, which now applies to a wide variety of tax obligations.
But the IRS also is accommodating other tax circumstances, such as installment payments and collection actions, under its new People First initiative.
"In addition to extending tax deadlines and working on new legislation, the IRS is pursuing unprecedented actions to ease the burden on people facing tax issues," said IRS Commissioner Chuck Rettig in announcing the program last month.
The tax actions gathered under the initiative are designed to provide "immediate relief to help people facing uncertainty over taxes," said Rettig. That will be accomplished, he added, by "temporarily adjusting our processes."
Those adjustments will apply during a special COVID-19 relief period that runs through July 15.
the most obvious tax problems are those faced by folks who owe but, even before the virus spread across the United States, were having difficulty paying.
Here is how the IRS says its People First approach will, to borrow from a ages old mantra, attempt to be kinder and gentler during coronavirus tax time to folks in these debt and collection circumstances.
Existing Installment Agreements: If you can't pay a large tax bill all at once when due, you can apply for an installment agreement (IA) that lets you pay it over time. In light of the financial difficulties caused by COVID-19, particularly the record number of folks who've lost jobs, the IRS says those with tax IAs can suspend any payments due between April 1 and July 15. This includes the basic tax installment payment agreement, as well as a direct debit IA.
The decision to forgo payment during this relief period won't put your tax IA account into default, according to the IRS. However, by law interest will continue to accrue on any unpaid balances.
However, the IRS doesn't offer any further explanation yet as to how it will deal with suspended IA payments. They could be spread out over the life of the arrangement or could all be due in a lump sum after July 15.
New Installment Agreements: As for folks just now finding themselves in tax payment trouble, the IRS is still offering new IAs. These new applications are being offered under the existing application rules.
Offers in Compromise: Sometimes an installment agreement isn't feasible. You don't have the money now and realistically don't expect to have it in the near future to pay off your tax bill. In this case, you can make the IRS an Office in Compromise (OIC). Here, you provide the IRS with a reasonable amount that you can pay toward a due or overdue tax bill. The agency could decide to accept that amount as full payment in order to get some due taxes and move your case off its books.
Under the People First initiative, the IRS says it is taking the following steps regarding OICs:
- Pending OIC applications: The IRS will allow taxpayers until July 15 to provide requested additional information to support a pending OIC. In addition, the IRS will not close any pending OIC request before July 15 without the taxpayer's consent.
- OIC Payments: Taxpayers have the option of suspending all payments on accepted OICs until July 15. Again, as with installment agreements, unpaid OIC amounts by law will continue to accrue interest charges.
- Delinquent Return Filings: Filers delinquent in filing their tax return for tax year 2018 will not face any IRS default actions. However, the IRS says taxpayers should file any delinquent 2018 return (and their 2019 return) on or before July 15.
- New OIC Applications: Where a taxpayer is facing a liability that's more than his or her net worth, the IRS notes that the OIC process is designed to resolve outstanding tax liabilities by providing a Fresh Start, another IRS program created in the wake of 2008's Great Recession. It is a more flexible approach in working with taxpayers who are having trouble paying Uncle Sam because of economic factors beyond their control. The IRS has periodically expanded its Fresh Start offerings. You can find more on this at the IRS' OIC page.
Field, office and correspondence audits: One of the IRS' main responsibilities is to collect revenue. That sometimes requires audits (or examinations, as the agency calls them) of taxpayer filings and supporting documents. But during the coronavirus relief period, the IRS says it generally doesn't plan to start new field, office and correspondence examinations.
The agency says it will continue to work refund claims where possible, without in-person contact. And the IRS says it may start new examinations where deemed necessary to protect the government's interest in preserving the applicable statute of limitations.
The IRS also elaborated on other audit-related actions and how they are affected as the agency works under COVID-19 limitations. They are —
- In-person meetings regarding current field, office and correspondence examinations will be suspended. Even though IRS examiners will not hold in-person meetings, they will continue their examinations remotely, where possible. To facilitate the progress of open examinations, taxpayers are encouraged to respond to any requests for information they already have received or may receive on all examination activity during this period if they are able to do so.
- Unique situations, particularly for some corporate and business taxpayers, will be taken into account. The IRS understands that there may be instances where taxpayers may want the IRS to go ahead and start an examination. In those instances where people and records are available and it's in the best interest of both parties, the IRS may initiate activities to move forward with an examination. These will commence, however, with the understanding that COVID-19 developments could later reduce activities for an agreed period.
- General requests for information in connection with compliance activities will continue where feasible. In these cases, the IRS encourages taxpayers to respond as much as possible to this and any other official correspondence.
Field collection activities: Under usual tax circumstances, IRS collection efforts include liens and levies, which also encompass seizures of a personal residence. These actions typically are initiated by IRS field revenue officers. For now, however, the agency says it will be in some cases suspending these collection actions.
However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.
Automated liens and levies: Similarly, the IRS' new automatic, systemic liens and levies actions also will be suspended during this COVID-19 relief period.
Independent Office of Appeals: IRS appeals employees are not currently holding in-person conferences with taxpayers, but they will continue to work their cases. The necessary contacts will be held over the telephone or by video conference. Taxpayers are encouraged to promptly respond to any outstanding requests for information for all cases in the Independent Office of Appeals.
Private debt collection: Since 2017, the IRS has been handing over certain delinquent tax accounts to private debt collectors. This action is mandated as part of 2015's Fixing America's Surface Transportation (FAST) Act. However, during the COVID-19 relief period, the IRS will not send any new delinquent tax accounts to collection agencies.
Passport certifications: Not that anyone right now is seriously thinking about travel, especially long trips overseas in cramped planes with recycled air, but the IRS is taking such possibilities that require official documentation into account, too. The same 2015 transportation funding measure also requires the IRS to notify the State Department of taxpayers who owe substantial tax amounts.
Upon receiving this info, the State Department then can suspend the passports of these "seriously delinquent" taxpayers. Inflation adjustments in 2020 set the amount of tax debt that get a passport pulled at $53,000 or more.
However, during this COVID-19 relief period, the IRS says is will not provide new tax delinquency certifications to State. During this coronavirus leniency period, the IRS encourages such tax-owing individuals to work toward resolving their debt, for example, via an installment agreement or offer in compromise.
Statute of limitations remain paramount: While the IRS is offering a grace period for the many tax debt situations noted above, the agency also emphasized that it will continue to take steps where necessary to protect all applicable statutes of limitations.
In instances where statute expiration dates might be jeopardized during this period, taxpayers are encouraged to cooperate in extending such statutes. Otherwise, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statutes. But where a statutory period is not set to expire during 2020, the IRS says it is unlikely to pursue actions until at least July 15, 2020.
Closing COVID hopes: I hope these IRS actions take a little tax pressure off in this extraordinarily trying time.
I also hope if you haven't already received your COVID-19 relief payment, you get it soon. And I hope that you and your family continue to cope as well as possible with your close (and closed) sheltering quarters.
Mostly, though, I hope everyone does whatever it takes to stay safe!
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.