Tax Law Changes

IRS People First Initiative: Helping Struggling Taxpayers Details

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As efforts to flatten the contagion curve of coronavirus close businesses and schools across the country, many people are watching their paychecks disappear, their investments fall, and their sense of security slip away.

The IRS is aware of the intense effect the coronavirus is having on families, and to help; the agency has rolled out a new set of initiatives to reduce tax burdens during this difficult time.

Called the People First Initiative, the measures are set to run through July 15, 2020, with the possibility for extension, and they include numerous benefits for people with unpaid tax liabilities.

Key Benefits of the IRS People First Initiative

These are some of the main benefits of the People First Initiative:

  • No payments due on installment plans until July 15, 2020 — Call your bank if you want to cancel automatic payments.
  • Payment due date for Offer in Compromise agreements moves to July 15, 2020.
  • The deadline for submitting information for pending OIC agreements moves to July 15, 2020.
  • If the IRS is garnishment your wages for taxes owed, you can pause garnishment until July, but you need to tell your employer. The IRS has also suspended most automatic levies and liens.
  • Even if you owe over $53,000, the IRS won’t tell the State Department to revoke your passport — use this extra time to set up a payment plan.

The IRS plans to suspend a lot of collection activity, but if you are seriously delinquent and/or if your liability is nearing the statute of limitations, the agency may continue to pursue your liability. Taxpayers in this situation should take action now.

This initiative provides some relief for people who are struggling economically due to the coronavirus, and if you owe a taxes owed, these measures help buy you extra time. Keep reading for a breakdown of the details.

Payments for Installment Agreements Suspended

If you’re making installment payments on a taxes owed, you don’t have to make any payments between April 1 and July 15, 2020. Interest will still accrue on your liability, but you don’t have to worry about late fees or losing your arrangement.

Note that the IRS will not automatically stop direct debits. If you have automatic payments set up through your bank, you need to contact your bank to stop those drafts.

Changes to Offers in Compromise Agreements

An OIC is when the IRS agrees to settle your taxes owed for less than you owe, and the agency has implemented several relief efforts for taxpayers in various stages of this process including the following;

  • Pending OIC Applications: If you have an application pending and need to submit more info to the IRS, you now have until July 15, 2020. The IRS will not close any open applications during this time, even if you miss a deadline for submitting information.
  • OIC Payments: The IRS has moved the new date for payments on OICs to July 15, 2020. Interest will continue to accrue, but you can defer payments until that date.
  • Delinquent Returns: Typically, you need to stay current on all filing requirements, or you risk losing your OIC arrangement. However, in light of the coronavirus, the IRS is now giving taxpayers with OIC arrangements until July 15, 2020, to file returns for tax years 2018 and 2019.
  • New OIC Requests: If your taxes owed exceeds your net worth, you may qualify for an OIC. You can still submit applications during this time, but note that processing time may be delayed.

Outstanding Tax Returns

If you have outstanding tax returns, you may want to take advantage of the quarantine to catch up with your filing requirements. Over 1 million households are due refunds from unfiled returns, and you have up to three years to claim these funds.

In contrast, if you owe money to the IRS, filing now helps to stop penalties from occurring on your liability, and once you file your old returns, you can work with the IRS to set up a payment plan, apply for an OIC, or make other arrangements. Right now, you can set up those arrangements but not worry about making any payments until July 2020.

Additionally, the government has created a coronavirus relief package and plans to send out the following checks:

  • $1200 to individuals
  • $2400 to couples
  • $500 for each child

Individuals with income up to $75,000 and couples up to $150,000 qualify for these payments, and you can receive a partial payment if your income is up to $99,000 for individuals and $198,000 for couples. The government plans to base these numbers on 2018 tax returns — another compelling reason to file delinquent returns.

Even if you owe a taxes owed or have delinquent student loans, you can still receive your relief check. The only exception is if you owe child support.

Suspending Liens and Levies

The IRS plans to suspend all automated liens and levies during this time. A lien is a legal claim on your property, while a levy refers to a seizure of your property. For instance, if you have received a notice that the IRS plans to levy the funds in your bank account, the agency may not pursue that action until at least July 15, 2020.

Similarly, if the IRS is currently garnishing your wages, you can pause the garnishment, but you need to talk with your employer and let them know that you want to stop the wage garnishment.

The IRS also plans to suspend liens and levies initiated by field revenue officers. However, the agency will continue to pursue high-income nonfilers and may engage in other collection activities in severe cases.

Passport Revocation and Denial

Usually, if you owe more than $53,000 in back taxes, the IRS can advise the State Department not to issue you a passport or to revoke your current passport. As part of the People First Initiative, the agency has decided to suspend this action as well. However, it is not advised that you travel to another country during this time.

You can avoid losing your passport by taking one of the following steps:

  • Setting up an installment agreement
  • Getting approved for an OIC
  • Having a pending request for an installment agreement or an OIC
  • Applying for innocent spouse relief
  • Requesting a collection due process hearing related to a tax levy
  • Being in bankruptcy

If you have a seriously delinquent taxes owed, you may want to take advantage of this extra time to make arrangements with the IRS. By taking these steps now, you can avoid losing your passport, but again, you still don’t have to make any payments for a few months.

Private Liability Collection

As you may know, the IRS uses private liability collectors to pursue some unpaid liability. During this time, the agency will not be forwarding any new accounts to these collection agencies.

Changes to the Audit Process

Typically, when auditing accounts, the IRS meets with taxpayers in the field, talks with them in IRS offices, or corresponds through the mail. During this period, the agency plans not to start any new field, office, or correspondence audits, and it has stopped in-person meetings for audits.

However, IRS examiners will continue audits remotely, and the agency encourages taxpayers to submit requested information whenever possible. The IRS may also continue to perform audits as needed on taxes owed that are nearing the statute of limitations.

If corporate or business taxpayers prefer to deal with audits right now, the agency will try to work with them, but with the caveat that they may need to stop the process as changes due to COVID-19 develop.

Changes to Earned Income Tax Credit Verifications

The Earned Income Tax Credit (EITC) can be a valuable credit, and qualifying taxpayers can receive this credit with their tax refunds or in advance payments in their paychecks. Often, the IRS sends letters to taxpayers asking for additional information to ensure they are eligible for this credit.

If you’ve received a request for income verification or other details related to the EITC, you don’t have to respond until July 15, 2020. You will continue to receive the credit during this time.

Processing Appeals

There are no more in-person meetings for appeals, but the IRS plans to continue holding meetings over the phone or through videoconference. If you are dealing with an appeal, make sure to respond to requests for information as promptly as possible.

Statute of Limitations

The IRS encourages taxpayers to help by extending the statute of limitations as needed on their taxes owed. In cases where the statute is about to expire, the agency may pursue collection activity. However, if the statute does not expire until after 2020, the agency is unlikely to pursue much collection activity.

Taxpayer Advocate Service

During this time, the Taxpayer Advocate Service (TAS) is taking calls, but you can’t walk into the office. Use the number for the local TAS office in your area. The federal toll-free number is unavailable until further notice.

Dealing with taxes owed can be scary, but the People First Initiative is designed to help. If you need extra cash as you deal with the effects of the coronavirus, take advantage of the suspended due dates, and contact your employer or your bank to pause garnishments or automatic payments.

If you’ve been ignoring a taxes owed, this initiative presents the perfect opportunity to make an arrangement and still enjoy a bit of extra time before you need to make payments. Contact us today, and we’ll connect you to a tax professional who can help you set up payments, reduce the amount owed, eliminate penalties, or take other steps to get you back into good standing with the IRS.

This post was published on March 31, 2020

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