When the extended and complicated 2020 tax filing season officially ends at mid-week, the IRS says it will resume many postponed normal actions. This means taxpayer payments — including to debt collectors — and other tax matters that have been on COVID-19 hold will go back to what we used to call normal.
The 2020 extended main tax season is about to end, at least officially, on July 15.
I know. Millions of taxpayers (and their tax preparers) will, of course, delay their Form 1040 filings for a while (many until Oct. 15) by sending instead Form 4868 (and any due tax payments). And there will be the usual clean-up and follow-up that accompanies any tax season.
But for official, technical and most practical purposes, the arrival of this July 15 closes a lot of tax doors.
And it also re-opens several.
Specifically, the Internal Revenue Service's easing of many tax deadlines and requirements, collectively dubbed by the agency as its People First Initiative, ends.
That means that by the end of this week what we call normal tax operations will resume. Here's what that will means in some common taxpayer situations.
Existing tax installment payment agreements resume.
When the IRS established its COVID-19 (non)operation plan, most of it accounted for in the aforementioned People First Initiative, it paused payments of IRS installment agreements that were then in effect.
That meant taxpayer payments that were due between April 1 and July 15 were delayed. Note that while you weren't charged for not paying, interest continued to accrue over these last three months.
That payment grace period is about to end. The IRS says if you have one of these payment agreements and stopped sending the IRS money, you need to start making payments again. If you don't, you'll face the full force of pre-coronavirus implications, notably having the payment plan declared in default.
If you had for the last three months your bank suspend direct debit payments to your tax bill payment plan, contact your financial institution now to reestablish those payments and ensure your first monthly payment on or after July 15 is made. And so you don't get hit with late- or non-payment penalties.
Many tax payment plan participants might find that due to pandemic fiscal hardships, they still can't make the payments. In that case, you can use the IRS' online option to revise your agreement.
You also can call the number on their IRS notice if they have a Direct Debit Installment Agreement.
Offers in Compromise back on track.
An Offer in Compromise (OIC) is an option where a taxpayer can't pay a bill in full, but proposes a partial — and, emphasizes the IRS, a reasonable amount — that can be paid to settle the tax debt once and for all.
IRS consideration of such offers also got put on hold. But with the arrival of July 15, the IRS says that if it was reviewing your OIC when the pandemic procedures went into place, that process will resume as usual later this week.
The IRS says taxpayers awaiting final word on their OICs should restart remaking proposed payments on July 15. The IRS will amend these offers to allow for any skipped payments to be made at the end of the offer period, if the offer is accepted.
As for OICs that were accepted pre-coronavirus but taxpayers were unable to make the payments because of a COVID-19 hardship, the IRS says these folks should restart payments and make up the missed payments by July 15. If that's not possible, call the number on your OIC IRS notice to discuss possible solutions to the situation.
Private debt collectors to resume full operations.
During the IRS' effective coronavirus shutdown, the agency didn't forward new delinquent accounts to private debt collectors from April 1 to July 15. Collection agency interaction with taxpayers also was limited to phone calls, unless otherwise requested by the taxpayer.
With the end of the extended 2020 tax filing season on July 15, the IRS says that taxpayers who established payment plans with private debt collectors.
Where COVID-19 issues have created financial problems, the IRS says affected taxpayers should work with their assigned collection agency to establish a new payment arrangement or restructure their existing one based on their current situation.
Working back into tax normalcy: Obviously, getting back into what we've come to see as normal IRS and taxpayer interactions is going to take a while.
It's also likely to be messy for many. My best advice, to taxpayers as well as the IRS, is be patient.
Both sides need to work together and, of course, with tax professionals who'll also be in the middle of many of the delayed and now restarted tax situations. For the resumption of tax operations to be successful, all involved must deal with each other in good faith to resolve the problems that are going to crop up with the resumption of these myriad tax matters.
I know. That seems a bit Pollyannaish and somewhat out of character for me. But hey, coronavirus quarantine has its effects. Stay strong and good luck to everyone in dealing with COVID-19 and taxes!
You also might find these items of interest:
- EITC filers have more time to answer claim questions
- Taxpayers get more time to deal with COVID-delayed IRS notices
- New Taxpayer Advocate highlights COVID-19 effects on the IRS and taxpayers in her first report
|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.