Don't Mess With Taxes

Millions of Americans still are without jobs. Money from the first COVID-19 economic relief package is long gone. And there's no telling when (or if) Congress might approve more pandemic stimulus.

And on top of paying rent or feeding families, some people are facing an added and intimidating bill. They owe taxes to Uncle Sam.

The Internal Revenue Service has long heard cries of poverty from folks with large tax bills. In response, the tax agency has instituted systems to work with financially strapped taxpayers.

When the pandemic complicated every aspect of everyone's lives earlier this year, the IRS created the People First Initiative. Last week, it added another program, the Taxpayer Relief Initiative (TRI), in response to the ongoing economic trials that the coronavirus has created.

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

Longer to make short-term payments: So what are these next coronavirus phase TRI efforts?

One COVID-prompted change that I suspect will be very popular with a lot of people is the expansion of the IRS' Online Payment Agreement, or OPA.

OPA typically is used by individuals who owe $50,000 or less in combined income tax, penalties and interest. Businesses also qualify for this expedited payment option if their tax and other charges total $25,000 or less.

Both individual and business taxpayers must have filed all their tax returns. They also must pay off their tax bills under the OPA within 120 days.

But given the financial crunch caused by COVID-19, the TRI has extended this short-term payment period a bit. Taxpayers with an OPA now have up to 180 days to resolve their tax liabilities.

The TRI's extra 60 days to pay under an OPA earns this weekend's By the Numbers honor.

Easier to get an installment plan: If you need more than six months to pay off your tax bill, you can apply for an installment agreement.

With TRI, the IRS has made it easier to apply for these pay-over-time plans. If you owe up to $250,000 you don't have to provide the usual financial statements and substantiation to set up a plan as long as you propose a monthly payment amount that the IRS deems sufficient.

The IRS also has modified installment agreement procedures to further limit requirements for Federal Tax Lien determinations for some taxpayers who only owe for tax year 2019.

Other TRI highlights include: In addition to tweaking payment options, the TRI contains other taxpayer-friendly changes for taxes in coronavirus time.

Additional highlights include:  

• The IRS is offering flexibility for qualified taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
• Instead of classifying a taxpayer as in default for nonpayment of an existing installment agreement, in the case of individual and out-of-business taxpayers the IRS will automatically add certain new tax balances to those payment plans.
• Qualified taxpayers with existing Direct Debit Installment Agreements may now be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.
• Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves.

Then there are tax penalties. The only thing worse than owing the IRS is owing the agency even more because of these added charges related to your due tax bill.

The IRS is offering reasonable cause assistance for taxpayers facing penalties for failing to file, pay and deposit taxes. Penalty abatement relief also is available for taxpayers subject for the first time to one or more of these tax penalties.

Coronavirus tax help, but within reason: You might have noticed the word qualified used a lot in the TRI (and other) tax paying options.

The IRS is trying to find a workable balance in the relief provided for COVID-affected taxpayers and the agency's need to uphold the county's tax laws, noted Darren Guillot, the IRS Small Business/Self-Employed Deputy Commissioner for Collection and Operations Support in his recent TRI article for the agency's new online publication A Closer Look.

For the most part, TRI determinations and revised COVID-related collection procedures will be granted to taxpayers who have a record of filing their returns and paying their taxes on time.

But, said Guillot, the IRS will "make sure we have adequate resources available to work complex cases or address egregious non-compliance. And we'll work to secure the government’s interests in the event of future bankruptcies to uphold the laws and help ensure fairness in the tax system."

Don't delay: Finally, if you are having money and tax troubles, don't avoid the IRS. Your tax liabilities aren't going to magically disappear by your pretending they don't exist. They will only get worse.

You need to be proactive. Either you or your tax professional need to touch base with the IRS as soon as possible to work out a way to resolve your tax issues.

That's a sentiment echoed by the tax agency.

"If you're having a tax issue, don't go silent. Please don't ignore the notice arriving in your mailbox," Guillot said. "These problems don't get better with time. We understand tax issues and know that dealing with the IRS can be intimidating, but our employees really are here to help."

You also might find these items of interest:

• IRS is resuming issuance of tax balance-due notices
• Options to deal with tax bills that many worry they can't pay
• Taxpayer Advocate Service can help with certain COVID-19 stimulus payment problems

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