On March 25, 2020, the Internal Revenue Service (IRS) released guidance related to its “People First Initiative,” a program intended to respond to the challenges of Covid-19 by providing a variety of relief related to IRS deadlines and collection actions. The full IRS press release can be found here.
As part of its People First Initiative, the IRS is postponing certain Installment Agreement and Offer in Compromise payment deadlines and limiting certain IRS collection and enforcement actions. The IRS also intends to avoid in-person contact with taxpayers to the extent possible. The IRS projects these efforts will last through July 15, 2020.
Some key actions in the IRS People First Initiative include:
- Existing Installment Agreement Payments Suspended. 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 Debit Installment Agreement, may suspend payments during this period if they prefer. The IRS will not default any Installment Agreements during this period. However, interest will continue to accrue on any unpaid balances.
- IRS Encourages New Installment Agreements Applications. The IRS reminds taxpayers with outstanding federal tax liabilities who are unable to fully pay those liabilities that they are still able to apply for new installment agreements during the Covid-19 pandemic. Taxpayers may benefit from the assistance of a tax professional in preparing an Installment Agreement Request and negotiating the terms of that installment agreement.
Offers in Compromise
- Deadlines to Respond to Requests for Additional Information Extended for Pending Offer in Compromise Applications. The IRS will allow taxpayers until July 15, 2020, to provide additional information requested by the IRS to support a pending Offer in Compromise. In addition, the IRS will not close any pending Offer in Compromise request before July 15, 2020, without the taxpayer’s consent.
- Option to Extend Accepted Offer in Compromise Payment Deadlines. Taxpayers have the option of suspending all payments on accepted Offers in Compromise until July 15, 2020. However, interest will continue to accrue on any unpaid balances.
- Delinquent 2018 Form 1040 Return Filings Will Not Default an Offer in Compromise if Filed by July 15, 2020. The IRS will not default an Offer in Compromise for those taxpayers who are delinquent in filing their Form 1040 for 2018 tax year. Additionally, the IRS has also extended the 2019 Form 1040 filing and payment deadlines to July 15, 2020. To stay in compliance with the federal tax laws as required by the terms of the Offer in Compromise program, taxpayers should file any delinquent 2018 return and their 2019 return on or before July 15, 2020.
- IRS Encourages New Offer in Compromise Applications. The IRS reminds taxpayers that they are still able to apply for Offers in Compromise during the Covid-19 pandemic. Often taxpayers benefit from the assistance of a tax professional in understanding whether they qualify for an Offer in Compromise, preparing their Offer in Compromise application, as well as negotiating the terms of their Offer in Compromise.
IRS Encourages Taxpayers to File Unfiled Returns. The IRS reminds taxpayers who have not filed their tax returns for any tax year(s) prior to 2019 that they should file those delinquent returns. Taxpayers with outstanding federal tax returns should consider contacting a tax professional to consider various available options for resolving their federal tax liabilities, especially if they are unable to pay those liabilities in full.
Previously Initiated Collection Actions Mostly Suspended. Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended during this period. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.
New Automated Liens and Levies Suspended. New automatic, systemic liens and levies will be suspended during this period.
New Revocation or Denial of Passport Related to Unpaid Taxes Suspended. For seriously delinquent tax debt, the IRS is authorized to certify that debt to the U.S. Department of State. After receiving certification of tax debt from the IRS, the U.S. Department of State generally will not issue the taxpayer a passport or may revoke their current passport. If the taxpayer is overseas, the State Department may issue the taxpayer a limited validity passport, which is only good for direct return to the United States.
Prior to the Covid-19 pandemic, the IRS was ramping up its efforts related to the revocation or denial of taxpayer passports related to seriously delinquent federal tax debts. However, as part of the People First Initiative, the IRS will suspend new certifications to the U.S. Department of State through July 15, 2020.
To avoid passport revocation or denial after July 15, 2020, taxpayers with seriously delinquent federal tax debts are encouraged to submit a request for an Installment Agreement or, if applicable, an Offer in Compromise during this period. Seriously delinquent taxpayers may benefit from the assistance of a tax professional in assessing their options and resolving their seriously delinquent federal tax debts with the IRS.
New Audits Generally Suspended. During this period, the IRS will generally not start new field, office, or correspondence examinations. However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations. The IRS will continue to work refund claims where possible, without in-person contact.
Current Audits Will Continue; In-Person Audit Meetings Suspended. IRS examiners will continue to work their audits remotely, to the extent possible. However, in-person meetings regarding current field, office, and correspondence examinations will be suspended.
Current Appeals Cases Will Continue; In-Person Appeals Meeting Suspended. IRS Appeals employees will continue to work their cases remotely. Although Appeals is not currently holding in-person conferences with taxpayers, conferences alternatively may 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.
IRS Will Continue to Work to Protect Applicable Statutes of Limitations. The IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where a statute of limitations could expire during this period, the IRS encourages taxpayers to cooperate in extending such statutes of limitations. If a taxpayer will not agree to extend the statute of limitations, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statutes of limitations. 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.