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If you owe the Internal Revenue Service (IRS), you may be able to apply for a payment plan online to pay off your balance over time – but not right now. The IRS has scheduled a planned outage for the service.

The website currently says:

This service will be unavailable from approximately 12 a.m. (midnight) Eastern time on Wednesday, December 23, 2020, until approximately 7 a.m. Eastern time on Monday, Jan. 11, 2021, due to planned maintenance. We apologize for any inconvenience.

Once the service is back up, you can check out the site to see if you qualify to apply online:

  • You may qualify for a long-term payment plan (installment agreement) if you owe $50,000 or less in combined tax, penalties and interest, and filed all required returns.
  • You may qualify for a short-term payment plan if you owe less than $100,000 in combined tax, penalties and interest.

The best part? Once you apply, you will find out immediately whether your payment plan has been approved.

You can find out more about installment agreements here.

Are your accounts receivables piling up? With so many people out of work, many businesses are experiencing slow payers and (gulp) non-payers. If you’re not sure about the practical and tax aspects of handling those accounts, here are a few things to keep in mind.

Don’t assume that you can send a Form 1099-C for nonpayment.

When you get stiffed on a bill, some businesses figure they can exact their revenge by issuing a form 1099-C. Be careful.

A form 1099-C, Cancellation of Debt, is issued when certain debts are discharged for less than the full amount owed following an identifiable event, and the amount is $600 or more.

The form instructions note that you “File Form 1099-C for each debtor for whom you canceled $600 or more of a debt owed to you” if “You are an applicable financial entity” and “An identifiable event has occurred.” The instructions further clarify that those responsible for filing Form 1099-C are typically those in the business of lending money (on a regular and continuing basis). This includes not only banks and credit unions, but finance companies and credit card companies.

And the Tax Code – at section 6050P – is very clear about who must file.

Can You Issue Form 1099-C anyway?

If you aren’t included in the list, does that mean that you can issue Form 1099-C anyway? It’s a tricky area. Some tax professionals like to point to a 1998 Service Center Advice (downloads as a PDF), which concludes that “(i)ndividuals or entities not required by section 6050P to file Form 1099-C may nevertheless voluntarily file such forms in appropriate circumstances” as authority for issuing the forms anyway.

But before you rush out to issue a Form 1099-C based on a few lines from the Advice, be sure to read the entire thing.

The Advice notes that the filing of Form 1099-C isn’t intended to be a substitute for complying or an excuse for not complying with other areas of the law. Specifically, the Advice notes that the IRS does not express an opinion “whether utilization of Form 1099C as a debt collection technique may violate provisions of non-Internal Revenue Code law, such as Federal Bankruptcy law, and possibly provisions of the Fair Debt Collection Act and similar consumer protection legislation.”

Make Sure The Debt Has Been Discharged

And, even if you feel that you “fit” for purposes of voluntary compliance, you need to make sure that the debt has been properly discharged. When filing an information return, like a Form 1099-C, the IRS makes clear that the reporting must satisfy the Regulations, including the requirement in this case that there be an identifiable event before the form is issued. There are examples in the Regulations, but generally, an identifiable event occurs when the creditor believes that the debtor cannot pay or if the creditor will be unable to collect what is owed.

Issuing Form 1099-C shouldn’t be used as an invitation for the client to pay: reporting that a debt has been discharged and subsequently accepting payment could get you into trouble. It’s well settled, as noted in the Advice, that “intentionally erroneous, false, or fraudulent information returns may subject the filer to the section 7207 penalty… as well as to possible civil actions on the part of the debtor.”

In other words, if you’ve taken steps to mark the bill uncollectible, don’t keep trying to collect.

Tread Lightly

Those issues notwithstanding, relying solely on the Advice when issuing a Form 1099-C makes me uneasy. There is no binding, on-point legal authority on this issue, a point that’s been noted in court. And that leaves open the idea that filing Form 1099-C – especially in certain circumstances – may raise other legal issues. In one case, Cavoto v. Hayes, the filing resulted in a civil action for fraud (though it was not resolved in favor of the debtor).

And if you’re a lawyer or other professional who might be subject to malpractice or other claims (assuming the statute is still running), you’ll want to weigh the satisfaction you think you might feel by issuing the form against any potential claims from an angry client. Even unsubstantiated claims can result in headaches.

What About Your Own Taxes?

What happens to your own taxes if you don’t get paid? The answer – in many cases – is nothing. Most business owners can’t write off, for tax purposes, a bill that hasn’t been paid (notably, issuing a Form 1099-C doesn’t change that).

Here’s why. For cash-based taxpayers, income isn’t reported until received. If you’ve never accounted for the unpaid bill, it’s just an entry in your accounts receivable column. It was never taken into income, so you can’t subsequently deduct it.

The result is different for accrual-basis taxpayers. Those taxpayers typically report income when invoices are issued, meaning that they’ve accounted for the unpaid bill as income. If that invoice remains unpaid, it can be written off.

In both instances, however, the net result to you (zero) is the same. There’s no “extra” deduction for not getting paid.

It is worth noting, however, that your related out-of-pocket expenses remain deductible. So the materials that you might have used for the final product? Still deductible. The wages paid to your employees? Still deductible. You get the idea.

What About Lost Income?

But the unpaid bill, even if it’s for time that you can value (say, for example, that you bill at $100/hour and you spent three hours on the client), is not deductible. There is no magic trick to transform that “lost” income into a tax break. And that includes issuing the Form 1099-C.

I know: all of that stinks.

Takeaways

But there are some positive takeaways to be had.

Rather than rage about nonpaying customers, consider how not to find yourself in that situation at the start. That can begin with intake: research your potential client and consider asking for a deposit or retainer up front. Also, make sure that your contract or service agreement makes clear what your expectations are regarding payment, both in terms of frequency and timeliness.

If customers don’t pay timely, follow up early. It may just be a misplaced invoice or a genuine mistake. If nonpayment is a new development, consider offering payment options for those experiencing financial difficulties (remember, even the IRS offers installment agreements). But if nonpayment from a particular customer is chronic, it’s likely time to cut them loose.

If you still want to be paid after you’ve fired a customer, don’t use the Tax Code as your revenge: instead, consider talking to a lawyer or debt collections expert for advice.


Author’s Note: This piece focuses on small business owners with customers or clients who aren’t paying their bills. To find out more about the consumer side (when you’re the one who owes), click here.

There was an article that circulated recently suggesting that bankruptcies didn’t peak as expected. If the folks who are reaching out to me are any indication, just give it time. With unemployment numbers still high and many areas still under shutdown orders due to the pandemic, it’s clear that the economy is not back to normal. And one of the consequences of that economy is the inability of many consumers to pay off debt.

When you can’t pay off your debt, you may settle with the creditor for less than you owe. This can take a few forms, including short sales, foreclosures, or just agreeing with a credit card company to pay less than you owe if they stop chasing you for the balance.

No matter the form it takes, if you have cancellation of debt for less than the amount you owe, the amount of the canceled debt is considered income and may be taxable. I say “may” because there are exceptions and exclusions to this rule.

Form 1099-C

Here’s what you need to know. The lender or business owed the debt will sometimes issue Form 1099-C, Cancellation of Debt, to you for the forgiven amount. The IRS also gets a copy of Form 1099-C. The IRS will expect to see that amount reported on your tax return.

But what if you qualify for an exclusion or an exception? Even if you eligible for an exception or exclusion, you may still receive a form 1099-C. This is because the creditor doesn’t know whether you might have an exception or an exclusion: their responsibility is simply to report the details, including the amount of cancellation of debt and the date of cancellation. However, if the person who is issuing the form 1099-C has reason to know that the discharge of debt would not be reportable (such as, for example, a qualifying bankruptcy), then the form 1099-C shouldn’t be issued.

Exclusions & Exceptions

The most common exclusions include bankruptcy, insolvency, and qualified principal residence indebtedness.

If your debt was canceled as part of a Title 11 bankruptcy (includes Chapters 7, 11, and 13), it’s not includible in your income. To report the exclusion, attach Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), (downloads as a PDF) to your tax return and check the box at Part I, line 1a of the form. Enter the amount of canceled debt as a result of the bankruptcy case on line 2. You may also have to fill out part II of the form.

If you were insolvent just before your debt was canceled, you can exclude the debt from income. Use the insolvency worksheet (found in Pub 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals) (downloads as a PDF), to figure out whether this applies to you. Generally, you are insolvent to the extent that the total of all of your liabilities was more than the value of all of your assets immediately before the cancellation. To report the exclusion, attach Form 982 to your tax return and check the box at Part I, line 1b of the form. Enter the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately before the cancellation (use the worksheet to find this figure). You may also have to fill out part II of the form.

If your canceled debt is qualified principal residence indebtedness, it’s not includible in your income. Qualified principal residence indebtedness means a mortgage that you took out to buy, build, or substantially improve your main home (the one you live in most of the time). The mortgage must be secured by your main home, and the amount available for exclusion must not exceed $2 million ($1 million if married filing separately). To report the exclusion, attach Form 982 to your tax return and check the box at Part I, line 1e of the form. Enter the amount of the forgiven mortgage on line 2 but do not report more than the amount of the exclusion limit. If you continue to own your home after cancellation of qualified principal residence indebtedness, you must reduce your basis (generally, the purchase price plus adjustments) in the home.

Special Circumstances

If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Don’t panic: you may not have to report that entire amount as income. The amount (if any) you must report depends on facts and circumstances, including state law, how much each of you received, how much of any interest deduction from the debt was claimed by each person (think home mortgage), how much basis was allocated to each of you, and whether the canceled debt qualifies for any other exceptions or exclusion.

If your student loan is canceled in part or in whole, you may not have to include the canceled debt in your income. To exclude canceled student loan debt from your income, your loan must have been made by a qualified lender to assist you in attending an eligible educational institution. In addition, the cancellation must be due to death or permanent and total disability, or as part of a provision in the loan that all or part of the debt will be canceled if you work for a certain period of time (like certain teaching or public service arrangements). The canceled debt is not excludable if it is canceled because of services you performed for the educational institution that made the loan or provided the funds.

Be Careful

The rules governing cancellation of debt can be tricky. It’s best to consider the consequences before you enter into an agreement to settle a debt for less than what you owe. But even if it’s after you make the decision – or if the decision is made for you – consider consulting with your tax professional.


Author’s Note: This piece focuses on consumers who can’t pay their bills. To find out more about the business side (when you’re the one owed), click here.

The Internal Revenue Service (IRS) is adding barcode technology to its tax notices.

Starting this month, the IRS will add QR codes to certain tax notices. QR stands for quick response, since the code can convey a lot of information to your smartphone in a short period of time. It’s similar to a barcode but can transfer more information, including internet addresses.

QR codes are a combination of pixels. Each piece of the code conveys specific information – the combination can generate a lot of information. To read the information, you scan the QR Code with a smartphone.

The IRS is using the technology to allow taxpayers to scan codes on two particular notices, the CP14 or CP14 IA, with their smartphone and go directly to IRS.gov. From there, taxpayers can securely access their account, set up a payment plan, or contact the Taxpayer Advocate Service.

A CP14 notice is your first notification from the IRS that you owe money on unpaid taxes. It looks like this:

The IRS typically sends more than 8 million CP14 notices each year. Adding a QR code to the notices allows taxpayers to go directly to payment options, including installment agreements.

“These codes will give taxpayers immediate access to the most important information for them to pay their balances, set up payment agreements or reach out for help,” said Darren Guillot, the IRS Small Business/Self-Employed Deputy Commissioner for Collection and Operations Support. “We understand there’s a lot of information on the web, and we want to give taxpayers more secure tools that can more easily help them resolve their tax situations.”

“This will help make the entire process easier for taxpayers,” Guillot added.

If all goes well, this may be the first of many: the IRS is assessing the possibility of adding other QR codes to other balance due notices in the future.

Did you recently receive a penalty notice for your payroll tax deposit even though you remitted the correct amount?

You’re not alone. The Internal Revenue Service (IRS) has announced that a “small population of employers” may have received notice that they were being assessed a failure to deposit penalty – even though the penalty doesn’t apply.

Here’s how that happened.

As part of the FFCR Act (Families First Coronavirus Response Act), businesses with fewer than 500 employees (including some self-employed persons) are entitled to refundable tax credits. The credits are intended to mitigate the costs of providing qualified sick leave wages and qualified family leave wages paid to employees when an employee cannot work during the COVID pandemic. 

Additionally, under the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), employers also had an opportunity to claim the new employee retention credit (ERC). The ERC provides a refundable credit to employers, no matter the size of the business, for keeping employees on the payroll. The amount of the credit is 50% of qualifying wages paid up to $10,000 per employee for all quarters. 

In both cases, a business that’s entitled to receive the credit could reduce their required deposits of payroll taxes by the amount of the credit. That credit is reported (and reconciled) on Form 941 – the same form that businesses use to report and remit payroll taxes. 

In May of 2020, the IRS released Notice 2020-22 (downloads as a PDF) to confirm that employers claiming the new tax credits may reduce their deposits throughout the tax period up to the amount of the credit. Specifically, Section 3 of the Notice provided relief from the failure to deposit penalty imposed by section 6656 of the Internal Revenue Code (Code) for an employer’s failure to timely deposit payroll taxes “to the extent that the amounts not deposited are equal to or less than the amount of refundable tax credits to which the employer is entitled under the Families First Act and the CARES Act.” The Notice applied to qualified sick leave wages and qualified family leave wages paid during the period beginning April 1, 2020, and ending December 31, 2020, and employee retention wages paid during the period beginning on March 13, 2020, and ending December 31, 2020.

Sounds great, right? But since the schedules of liabilities on Form 941 didn’t always match the reduction in deposits for every pay date, the IRS processes flagged some returns. The IRS issued a failure to deposit penalty on the difference in the reported liabilities and the reduced deposits even though those reductions were appropriate. The IRS notified the affected businesses by sending a CP161 notice.

The result? Panicked business owners and taxpayers. And you know why: payroll taxes are serious stuff. Failure to remit them can, in some instances, result not only in penalties but personal liability for business owners (and in extreme cases, criminal penalty). You don’t want to be on the receiving end of these notices.

If you’re one of the affected businesses, the IRS advises that you don’t have to do anything, stating, “The IRS is taking actions to identify these employer accounts and correct them as soon as possible. Employers that have recently received these notices do not need to take additional actions at this time.”

Payroll companies, like Paychex, in receipt of the notices are advising their customers the same way.

In the meantime, the IRS says that it’s taking steps to stop this from happening in the future. For more information on the credits, you can check out the IRS FAQs here.

And if you’re thinking you’ve read this story before, it’s but not the same… Yes, I did just post on notices that were sent out when tax might not be due. This story isn’t about those notices – that’s a different mistake. And yes, it’s shaping up to be a long tax year.

It’s my annual Taxes from A to Z series! If you’re wondering how to figure basis for cryptocurrency or whether you can claim home office expenses during COVID, you won’t want to miss a single letter.

U is for Undue Hardship.

If you’d read any posts on extensions – like this one – you are aware that filing for an extension is generally an extension of the time to file, and not the time to file. It’s almost the extension mantra.

But did you know that there actually is an extension available for payments – but there’s a pretty high bar.

First things first. The form is Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship (downloads as a PDF). It’s used to request an extension of time under section 6161 for payment of the tax shown on your return or an amount determined as a deficiency (an amount you owe after an examination of your return). It’s not meant to be a substitute for a regular extension or to set up an installment agreement.

You can file Form 1127 if you will owe any of the following, and paying the tax when it is due will cause an undue hardship. 

  • Income taxes
  • Self-employment income taxes
  • Withheld taxes on nonresident aliens and foreign corporations
  • Taxes on private foundations and certain other tax-exempt organizations
  • Taxes on qualified investment entities
  • Taxes on greenmail (popular in the 1980s but not so much now)
  • Taxes on structured settlement factoring transactions
  • Gift taxes (but not estate taxes)

Form 1127 can also be filed if you receive a notice and demand for payment (or tax bill) for any of the following if paying them at the time they are due will cause undue hardship: 

  • Normal taxes and surtaxes
  • Taxes on private foundations and certain other tax-exempt organizations
  • Taxes on qualified investments
  • Gift taxes

But here’s the key. You can only use the form if you can prove undue hardship. “Undue hardship” means more than an inconvenience: you must show that you would sustain a substantial financial loss if required to pay a tax or deficiency on the due date. The mere inability to pay does not ordinarily result in penalty relief. Under Treas. Reg. 301.6651–1(c), you must also show that you exercised ordinary business care and prudence for the liability. The IRS will look at all of the facts and circumstances, including your financial situation, and the amount and nature of your spending compared to your income. The IRS will consider whether you made reasonable efforts to conserve sufficient assets in a marketable form (you can’t have converted them to illiquid assets or restricted them in some way) and still could not pay all or part of your tax when it came due.

But you know how I noted earlier that an extension to file isn’t an extension to pay? The reverse is also true: undue hardship generally does not affect your ability to file. You can substitute this form for an extension to file (and it usually doesn’t provide a basis for penalty relief in a failure to file situation). 

You should file Form 1127 as soon as you know of a tax liability or a tax deficiency that you cannot pay. If the liability is for an upcoming return, file on or before the due date of that return, not including extensions. If you are requesting an extension of time to pay an amount determined as a deficiency, file on or before the due date for payment indicated in the tax bill. 

Typically, the IRS won’t give you more than six additional months to pay the tax shown on a return. However, other than taxes due under sections 4981 (excise tax on undistributed income of real estate investment trusts), 4982 (excise tax on undistributed income of regulated investment companies), and 5881 (greenmail), you may be granted an extension for more than six months if you are out of the country. And you must pay the tax before the extension runs out: do not wait to receive a bill from the IRS.

You can find the rest of the series here:

With a week to go before the tax filing season deadline, many folks may be focusing on July 15, 2020, as the date to mail in payments for the 2019 tax year. But there’s another payment deadline looking: the Internal Revenue Service (IRS) is reminding taxpayers who took advantage of the People First Initiative tax relief that they need to restart their payments.

In March of 2020, IRS Commissioner Chuck Rettig announced the details of the IRS People First Initiative. At the time, Rettig said, “The new IRS People First Initiative provides immediate relief to help people facing uncertainty over taxes.”

The program included options to suspend installment agreements, limit liens and levies, and no new passport certifications to the Department of State for taxpayers who are “seriously delinquent” through July 15, 2020.

Now, however, as the IRS continues to reopen its operations (you can find out more here), taxpayers should start paying again to avoid penalties and a possible default.

If you suspended your installment agreement payments between April 1 and July 15, 2020, you will need to resume payments by your first monthly payment due date after July 15. If you had your bank suspend direct debit payments, contact the bank immediately to ensure that your first monthly payment due date on or after July 15, 2020, is sent to avoid penalties. If you can’t meet your current installment agreement terms due to a COVID-related hardship, you can revise the agreement on IRS.gov/paymentplan or call the customer service number on your IRS notice.

If you previously submitted an Offer In Compromise, but the IRS has not yet responded, you should resume your required payments starting July 15, 2020. The IRS will amend the Offer to allow you to pay any skipped payments at the end if the Offer is accepted.

If you have an Offer in Compromise in place, and you were unable to make the payments because of a COVID-19 hardship, you should resume payments and make up the missed payments by July 15, 2020. If you are unable to make up the missed payments, you can contact the number on your IRS notice.

The IRS did not forward new delinquent accounts to Private Collection Agencies (PCAs) from April 1 through July 15, 2020, and PCA interaction with taxpayers was limited to inbound telephone calls unless otherwise requested. If your PCA payments were on hold, you should now resume payments by July 15. The IRS encourages you to work with your assigned PCA to establish a new payment arrangement or restructure an existing one based on your current situation.

“Through the People First Initiative, we have endeavored to provide unprecedented relief to help those who owed federal taxes and allow them extra time,” said IRS Commissioner Chuck Rettig. “As we resume a phased-in approach to our normal operations, we are sympathetic to the many Americans still suffering COVID-related hardships and stand ready to continue offering help to those who need it.”

Finally, if you are experiencing hardship or you have questions about payments, call the customer service number provided on your notice. Phone lines are open, but you should expect to wait since hold times are long. You can also check out your options through IRS.gov/payments to make one time or recurring payments without having to contact the IRS.

It’s my annual Taxes from A to Z series! If you’re wondering how to figure basis for cryptocurrency or whether you can claim home office expenses during COVID, you won’t want to miss a single letter.

J Is For Jeopardy Assessment.

Okay, I should come clean from the beginning: This post doesn’t involve Alex Trebek. I know, that part stinks. But even Trebek-less, jeopardy assessments are pretty interesting.

You already know that the Internal Revenue Service (IRS) has very specific procedures for assessments and collections. But sometimes, they have to do things a bit differently. And jeopardy assessments are one of those things.

Jeopardy assessments are made – before the IRS makes an assessment of a deficiency – when the agency believes that assessment or collection would be endangered if regular procedures were followed. So, if the collection of an unassessed liability is in jeopardy, the IRS can make an immediate assessment and pursue collection without the need to follow those “normal” procedures.

When a jeopardy assessment is made, the tax, penalties, and interest become immediately due and payable.

To make a jeopardy assessment, at least one of these factors must be present:

  1. the taxpayer is or appears to be designing quickly to depart from the United States or to conceal him/herself;
  2. the taxpayer is or appears to be designing quickly to place his/her property beyond the reach of the government either by removing it from the United States, by concealing it, by dissipating it, or by transferring it to another person; or
  3. the taxpayer’s financial solvency is or appears to be imperiled.

There are many factors that can influence whether to make a jeopardy assessment, including when a taxpayer may be involved in illegal activity. That could include organized crime, wagering cases, and receiving income from illegal sources.

And it doesn’t stop there: as mentioned earlier, once the jeopardy assessment has been made, if the IRS believes that the collection of the tax might be in danger, the IRS can also bypass the normal notice procedures and go ahead with a levy.

But, a jeopardy assessment isn’t the end: remedies are available. Those remedies are largely the same as those available to all taxpayers including filing a petition to have a court examine the assessment.

If this sounds pretty scary, be aware that these powers aren’t limitless. Jeopardy assessments are to be used when reasonable and appropriate – and as authorized by law. You can find the authority for jeopardy assessments in the Tax Code:

  • IRC 6861 (where the due date for filing of a return has expired);
  • IRC 6862 (taxes other than income, estate, gift, and certain excise taxes);
  • IRC 6867 (where the owner of a large amount of cash is not identified)

You can find the rest of the series here:

Some Internal Revenue Service (IRS) call centers and services are temporarily shutting down in response to COVID-19.

COVID-19 is the official name for the infectious disease caused by the most recently discovered coronavirus. According to Johns Hopkins, as of March 27, 2020, there are 593,291 confirmed cases of COVID-19 in 176 territories and countries. The United States has 101,657 confirmed cases with reported cases in every state.

As a result, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. And, Governors in several states have issued stay-at-home orders and ordered non-essential businesses to close. That includes many federal employees. For example, Social Security offices are closed to the public for in-person service.

The IRS is following suit. A notice on the IRS website declares, “In response to the national emergency and to protect our employees, America’s taxpayers, communities and our partners, the IRS has temporarily closed all Taxpayer Assistance Centers and discontinued face-to-face service throughout the country until further notice. The IRS is continuing to process tax returns, issue refunds, and help taxpayers to the greatest extent possible.”

The IRS subsequently advised in a tweet on March 25, 2020:

Earlier this week, tax professionals confirmed that the IRS is not answering phones at the Offer In Compromise Unit and the Practitioner Priority Service. A message on the OIC Unit advises that “Live telephone assistance is not available at this time.”

Now, the IRS has confirmed that “Due to staff limitations, the Practitioner Priority Service (PPS) line, the e-Services Help Desk line and the e-Services, FIRE and AIR system help desks are closed until further notice.” As a result, IRS suggests that you “Please make IRS.gov your first option for answers to questions.”

Additionally, the IRS is temporarily suspending acceptance of new Income Verification Express Services (IVES) requests and you can expect delays with existing IVES processing. There are also delays in Centralized Authorization File (CAF) number authorizations (notice how I didn’t make a snarky comment there suggesting the latter isn’t out of the ordinary).

There’s more. All AARP Foundation Tax-Aide services and most IRS Volunteer Income Tax Assistance (VITA) program sites have closed. Additionally, all Taxpayer Assistance Centers (TACs) are closed until further notice.

For taxpayers with open Taxpayer Advocate Service (TAS) cases, the IRS is advising taxpayers and practitioners to call their local TAS office directly. The TAS tweeted:

And those stimulus payment questions? You’ll have to wait on IRS to answer those, too. A notice to practitioners advises that “Additionally, the IRS is unable to answer any questions as yet on stimulus payments. Normal operations will resume as soon as possible. Please check IRS.gov for updates.”

Some of the closures may be frustrating for taxpayers, but there is a silver lining: collection and enforcement actions are limited. Relief ranges from suspending installment agreements payments (you have to make the arrangements) to postponing compliance actions like levies. Audits are also on hold.

And there’s some good news: The IRS will continue to work refund claims where possible, without in-person contact, and issue tax refunds. You can check the IRS  “Get Refund Status” tool for refund updates.

Eventually, things will get back to normal. In the meantime, be prepared for extended wait times for calls and correspondence. Be proactive and patient. 

If you have an update or tip, here’s how to reach me (including secure methods for employees who wish to remain anonymous).

The Internal Revenue Service (IRS) has announced a series of steps to assist taxpayers impacted by COVID-19. Relief ranges from easing payment guidelines to postponing compliance actions.

COVID-19 is the official name for the infectious disease caused by the most recently discovered coronavirus. According to John Hopkins, as of March 25, 2020, there are 451,355 confirmed cases of COVID-19 in 172 territories and countries. The United States has 55,568 confirmed cases with reported cases in every state.

As a result, on March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. Additionally, several Governors have issued stay-at-home orders.

The result is that many taxpayers cannot get out to file or do other tax-related business. In response, the IRS announced that the tax filing season been pushed to July 15, 2020.

The IRS also started scaling back operations at its call centers, causing frustration for tax professionals and taxpayers alike. Now, the IRS is taking further action.

“The IRS is taking extraordinary steps to help the people of our country,” said IRS Commissioner Chuck Rettig. “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.”

Specifically, the IRS is introducing its IRS People First Initiative. “The new IRS People First Initiative provides immediate relief to help people facing uncertainty over taxes,” Rettig says. 

“We are temporarily adjusting our processes to help people and businesses during these uncertain times. We are facing this together, and we want to be part of the solution to improve the lives of all people in our country.”

So what’s in the initiative? Highlights include:

Existing Installment Agreements. For taxpayers under an existing Installment Agreement, payments due between April 1 and July 15, 2020, are suspended. The IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances. 

Offers in Compromise (OIC). Taxpayers with pending OIC applications will have until July 15 to provide requested additional information as support; the IRS will not close any pending OIC request before July 15, 2020, without the taxpayer’s consent. Taxpayers with accepted offers can suspend payments on until July 15, 2020, although by law, interest will continue to accrue on any unpaid balances. Further, the IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for the tax year 2018; 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 through 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 through July 15, 2020.

Passport Certifications to the State Department. IRS will suspend new passport certifications to the Department of State for taxpayers who are “seriously delinquent” through July 15, 2020.

Private Debt Collection. New delinquent accounts will not be forwarded by the IRS to private collection agencies to work through July 15, 2020.

Field, Office, and Correspondence Audits. The IRS will generally not start new field, office, and correspondence examinations until July 15, 2020 (but see the note below related to statutes of limitations).

  • In-Person Meetings. In-person meetings for existing field, office, and correspondence examinations will be suspended. IRS examiners will continue examinations remotely where possible. Taxpayers are encouraged to respond to requests for information on all examination activity during this period if possible.
  • Unique Situations. The IRS understands that there may be instances where the taxpayers desire to begin an examination. When it’s in the best interest of both parties and appropriate personnel are available, the IRS may initiate activities to move forward with an examination.

Refund Claims. The IRS will continue to work refund claims where possible, without in-person contact. 

General Requests for Information. The IRS encourages taxpayers to respond to any other IRS correspondence requesting additional information during this time, if possible. 

Earned Income Tax Credit (EITC) & Wage Verification Reviews. Taxpayers have until July 15, 2020, to respond to the IRS to verify that they qualify for the EITC or to verify their income. Through July 15, 2020, the IRS will not deny these credits for a failure to provide the requested information.  

Independent Office of Appeals. Appeals will continue to work cases. 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 protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized, taxpayers are encouraged to cooperate in extending such statutes. Otherwise, the IRS will issue Notices of Deficiency and take steps 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 significant collections and related actions until at least July 15, 2020.

Practitioner Priority Service (PPS). The IRS warns that there may be more significant wait times for the PPS. However, practitioners, including myself, are reporting that they are unable to reach representatives. Currently, when you call, a message advises, “Live telephone assistance is not available at this time.”

Expect that some of this could change. Rettig advises, “The IRS will continue to review and, where appropriate, modify or expand the People First Initiative as we continue reviewing our programs and receive feedback from others.”

“We are committed to helping people get through this period,” he said, “and our employees will remain focused on these and other helpful efforts in the days and weeks ahead. I ask for your personal support, your understanding – and your patience – as we navigate our way forward together. Stay safe and take care of your families, friends and others.”

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