IRS Taxpayer Relief Initiative Provides Assistance to Delinquent Taxpayers

The IRS has eased up on collection activity in order to help taxpayers affected by COVID-19.  Below is summary of options and programs enacted to provide additional relief…

Offers in Compromise

In most cases, a taxpayer has five months to full pay their offer in compromise once it has been accepted.  Without providing exact details, the IRS indicates they are extending flexibility on payment terms.

In addition to paying the offer amount when due, a taxpayer is required to remain in compliance for 5 years after their offer is accepted.  This includes paying all liabilities when due.  It remains to be seen whether or not the IRS will also offer flexibility in this area as well.

Pyramiding Liability

The IRS does not like it when taxpayers owe for previous years, get into an agreement and then add additional current liability.  They refer to this as pyramiding liability.

The IRS Taxpayer Relief Initiative makes an exception and allows the collectors to automatically add certain new tax balances to existing installment agreements.  Individual taxpayers and businesses no longer in operation may benefit from the new policy.

Streamlined Installment Agreements

Up to this point, taxpayers were able to enter into installment agreements up to $100,000 with little to no financial backup.  This assumes a taxpayer could full-pay their liability over a given amount of time.

The amount as now been increased to $250,000

Tax Liens

Up until now, a taxpayer was able to forego having the IRS file a tax lien assuming they owed less than $50,000 and met certain payment conditions.

Now, if a taxpayer owes less than $250,000 for 2019 liability, they may request that the IRS forego filing a lien as well.  Certain conditions must be met here as well including full-paying the liability over time.

Electronic Payment Adjustments

If taxpayers are set up to make their installment agreement payments electronically, they now have an option to propose a lower payment amount and/or request to change payment dates online.

Short-term Installment Plans

Previously, a taxpayer was given 120 days to resolve their liability issues under as short-term payment plan.  The 120-day period has now been extended to 180 days

Request for Deferment

If a taxpayer’s financial condition has worsened with the pandemic, they can request that installment payments be delayed until their financial condition improves.

Penalty Relief

Penalty relief options including relief based on reasonable cause or first time offenders have not changed.  That being said, they may come in handy for taxpayers that would otherwise not need the help.  Anyone with tax issues stemming from COVID should ask their tax professional about abating penalties.

Now is the best time to deal with your tax issues.  The sooner you start, the more time you have to plan.  Proper planning can save you hassle, worry and thousands of dollars or more.

If you need help, pick up the phone and call us at (877) 829-8370 or email us at info@taxresolutioninstitute.com.