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March 25, 2020

Tax Planning in the Wake of COVID-19: IRS Provides Additional Tax Relief

Significant Modifications to Tax Payment Guidelines, Collection Activities, and Audit & Appeals Procedures During Pandemic

By Matthew Sapowith, MGO Tax Partner

In a day of seismic importance to the economic future of the United States, particularly as we await the final vote and release of the historic CARES stimulus bill, the Internal Revenue Service (IRS) has announced a new program aimed at supporting taxpayers during the COVID-19 pandemic.

The ‘People First Initiative’ represents a series of adjustments to payment guidelines and compliance actions aimed at reducing pressure related to tax payments for a nation and economy reeling from the fallout of the pandemic.

The IRS is taking extraordinary steps to help the people of our country,” said IRS Commissioner Chuck Rettig in an official statement. “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. During this difficult time, we want people working together, focused on their well-being, helping each other and others less fortunate.”

Key Highlights of the People First Initiative include:

  • Existing Installment Agreements – For taxpayers under an existing Installment Agreement, payments due between April 1 and July 15, 2020 are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.
  • New Installment Agreements – People unable to fully pay their federal taxes can resolve outstanding liabilities by entering into a monthly payment agreement with the IRS.
  • Changes to Offers in Compromise (OIC)
    • 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, 2020, without the taxpayer’s consent.
    • OIC Payments – Taxpayers have the option of suspending all payments on accepted OICs until July 15, 2020, although by law interest will continue to accrue on any unpaid balances.
    • Delinquent Return Filings - The IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year 2018. However, taxpayers should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020.
  • Field Collection Activities - Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended until July 15, 2020. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.
    • Automated Liens and Levies – New automatic, systemic liens and levies will be suspended until July 15, 2020.
    • Passport Certifications – The IRS will suspend new certifications preventing taxpayers from receiving or renewing passports to the State Department for taxpayers who are “seriously delinquent” until July 15, 2020. These taxpayers are encouraged to submit a request for an Installment Agreement or, if applicable, an OIC during this period.
    • Private Debt Collection – New delinquent accounts will not be forwarded by the IRS to private collection agencies to work during this period.
    • Field, Office and Correspondence Audits – During this period, the IRS will generally not start new field, office and correspondence examinations. They will continue to work refund claims where possible, without in-person contact. However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.
    • In-Person Meetings - 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 - The IRS may initiate activities to move forward with an examination in circumstances where the taxpayers desire to begin an examination while people and records are available and respective staffs have capacity – particularly for some corporate and business taxpayers – with the understanding that COVID-19 developments could later reduce activities for an agreed period.
    • General Requests for Information - In addition to compliance activities and examinations, the IRS encourages taxpayers to respond to any other IRS correspondence requesting additional information during this time if possible.
  • Earned Income Tax Credit and Wage Verification Reviews – Taxpayers have until July 15, 2020, to respond to the IRS to verify that they qualify for the Earned Income Tax Credit or to verify their income. Until July 15, 2020, the IRS will not deny these credits for a failure to provide requested information.
  • Independent Office of Appeals – Appeals employees will continue to work their cases. Although Appeals is not currently holding in-person conferences with taxpayers, conferences may be held over the telephone or by videoconference. Taxpayers are encouraged to promptly respond to any outstanding requests for information for all cases in the Independent Office of Appeals.
  • Statute of Limitations - The IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations 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. Where a statutory period is not set to expire during 2020, the IRS is unlikely to pursue the foregoing actions until at least July 15, 2020.

The People First Initiative should have a significant effect on taxpayers who are in the tax debt collection and enforcement process, undergoing audits, and/or appeals. For a number of those taxpayers, the changes should postpone or ease a number of tax compliance activities until July 15th, 2020.

For more information on how the People First Initiative affects your tax situation, or to schedule a consultation, please contact us.

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