The IRS has stepped up to help people facing the challenges of COVID-19 with a number of measures, including easing payment guidelines and postponing compliance actions for an initial period of April 1 to July 15, 2020. This is in addition to the extension of the tax filing deadline to July 15, 2020.
An important note: 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. If this applies to you, it is important to make a concerted effort to obtain and submit all requested information. If you are not able to do so, you’ll need to inform the IRS indicating the reason why. Until July 15, 2020, the IRS will not deny these credits for a failure to provide requested information.
Some of the other measures the IRS is poised to take include:
· Postponing certain payments related to Installment Agreements and Offers in Compromise. For taxpayers under an existing Installment Agreement, payments due between April 1 and July 15, 2020, are suspended.
· Providing the option for taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, to suspend payments during that April 1–July 15 period. The IRS will also not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.
· Modifying tax collection and certain enforcement actions. During this period, to the maximum extent possible, the IRS will avoid in-person contacts. However, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations.
· Suspending liens and levies (including any seizures of a personal residence) initiated by field revenue officers. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted. In addition, new automatic, systemic liens and levies will be suspended during this period.
· If you are unable to fully pay your federal taxes by the new July 15 deadline, the IRS will help you resolve outstanding liabilities by setting up a monthly payment agreement.
· If you are currently working toward an Offer in Compromise (OIC), the IRS is taking the following steps to assist you, depending on where you are in the process:
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.
New OIC Applications: The IRS reminds people facing a liability exceeding their net worth that the OIC process is designed to resolve outstanding tax liabilities by providing a “Fresh Start.” Further information is available at IRS.gov
· If you have not filed your taxes for the tax years before 2019, now is the time to do it, especially if you believe you are owed a refund (after three years, you will forfeit your refund). Once delinquent returns have been filed, if you have a tax liability, consider taking the opportunity to resolve any outstanding liabilities by entering into an Installment Agreement or an OIC with the IRS to obtain a “Fresh Start.”
· The IRS will suspend new certifications to the Department of State for taxpayers who are “seriously delinquent” during this period. These taxpayers are encouraged to submit a request for an Installment Agreement or, if applicable, an OIC during this period. Certification prevents taxpayers from receiving or renewing passports.
· New delinquent accounts will not be forwarded by the IRS to private collection agencies during this period.
· The IRS will generally not start new field, office, or 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.
Despite all of these considerations, the agency is still encouraging taxpayers to respond to any IRS correspondence requesting additional information during this time if possible.
Jonathan Medows is a New York City-based CPA who specializes in taxes and business issues for freelancers and self-employed individuals across the country. He offers a free monthly email newsletter covering tax, accounting and business issues to freelancers on his website, http://www.cpaforfreelancers.com— which also features a blog, how-to articles, and a comprehensive freelance tax guide.