People First Initiative
To help with the Coronavirus Pandemic, the IRS offered relief for taxpayers with delinquent back tax issues and tax audits. The IRS People First Initiative, explained in IR-2020-59, will offer some assistance with back tax collections and tax audits beginning on April 1st through July 15th, 2020.
Below are answers to some questions that you may have regarding installment agreements, offers in compromise, unfiled tax returns, passport suspension, private tax debt collectors, audits, statute of limitations periods, and appeals during the COVID-19 Pandemic.
What if I Cannot Pay my Installment Agreement?
If you have negotiated an installment agreement, such as a direct debit installment agreement, to pay back taxes, you may suspend payments that are due between April 1st and July 15th, 2020.
The IRS reminded people and businesses that interest continues to accrue on unpaid back tax payments. Therefore, it makes sense to keep making tax payments if you can.
The good news is that if you cannot pay your back taxes, then the government will not file a lien and send an Intent to Levy, Intent to Terminate Installment Agreement Letter and resume collections.
What about my Existing Offer in Compromise?
An Offer in Compromise is a way for a taxpayer or business to settle their back taxes for less than what is owed. To settle your taxes for less than what is owed, you must demonstrate to the IRS that you do not have an ability to pay. To determine whether a taxpayer has an ability to pay, the IRS analyzes the taxpayer’s balance sheet and income statement. If the IRS believes that it can collect back taxes within the collection statute, 10 years from the date the tax is due and owed, then the IRS will deny your offer.
If you have a pending offer, then the People First Initiative will permit until July 15 to provide requested additional information to the Offer Specialist. The Offer Specialist is an IRS employee devoted to analyzing Offers in Compromise.
The IRS has stated that the Offer Specialist will not close pending tax offers before July 15th, 2020 without the taxpayer’s consent.
What if I Cannot Pay my Accepted Offer in Compromise?
The IRS has two types of offers, a cash offer and periodic payment offer. A cash offer must be paid five months within acceptance. A periodic offer must be fully paid within 24 months.
If the IRS granted your tax offer and you cannot comply with the payment terms, then the IRS will suspend all payments until July 15th, 2020.
What Should I do if I have not Filed my Taxes in Years?
In IR-2020-50, the IRS reminded taxpayers that have not filed in years, to file. The IRS further reminded people that if they are due a refund, then you only have three years from the due date, plus extension, to file, or two years from the date of payment.
In order to request relief, such as an Offer in Compromise or an Installment Agreement, the filing of the last six years of tax returns from the current due date is necessary to be compliant under the IRS guidelines. Filing and payment compliance is critical if you want to resolve your back taxes.
What Happens if my Case was Assigned to a Revenue Officer?
The IRS refers egregious back tax cases, exceeding $250,000, or owing payroll taxes, to a Revenue Officer. A Revenue Officer is a local civil investigator that is responsible for collecting back taxes and compliance. The People First Initiative suspends liens and levies, including the seizure of a home, started by a Revenue Officer.
Notwithstanding the above, Revenue Officers can still take enforcement action, but they are exercising restraint.
This year, there was an IRS initiative to visit high income, non-filers. Revenue Officers are still instructed to pursue non-filers. With social distancing in place, I anticipate the IRS contacting non-filers by mail or phone.
What if my Case is Assigned to the IRS Automated Collections Unit (ACS)?
The IRS Automated Collections Unit (ACS) handles smaller cases, $250,000 income taxes or less, and typically smaller back payroll cases not referred to a Revenue Officer.
The new IRS initiative will suspend new automatic systematic liens and levies during the April 1st through July 15th period.
Is the IRS Suspending Passports During the Coronavirus Outbreak?
The IRS is still suspending new certifications with the Department of State if you owe more than $53,000 to the IRS and have exhausted all collection due process rights.
Is the IRS Referring Cases to a Private Debt Collector?
To combat budgetary needs, the IRS sent small cases to outside debt collectors. The IRS stated that it would not send new delinquent accounts to private collection agencies from April 1st, 2020 to July 15th, 2020.
What will Happen with my Ongoing Tax Audit?
The good news is that if the IRS has not sent you a tax exam letter, then you’re safe for now. The IRS stated that it will not start a new field, office or correspondence audits during the April 1st 2020 to July 15th, 2020 period.
Ongoing audits are being worked remotely and taxpayers are encouraged to continue to respond to all outstanding audit inquiries.
Audits are so stressful for taxpayers and I’m disappointed to see that cases are still being worked. However, most auditors have been flexible with extending deadline dates.
What if the IRS is Running Out of Time to Audit?
The IRS has announced that it will be mindful of the statute of limitation periods.
The government has three years to audit a return from the later of its due date or when the return is filed. The government can extend the audit statute if there is a substantial understatement of income. A substantial understatement of income is a 25% omission of gross income on a return. The burden is on the government to prove that you understated your income. The government has an unlimited amount of time to audit a return if there is tax fraud. The government will not go beyond the six-year statute of limitations period unless it’s a foreign information reporting return such as an Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts (Form 3520).
The IRS is required to have six months to one year remaining on the statute or they will issue a Statutory Notice of Deficiency to stop the statute. The Statutory Notice of Deficiency provides you with 90 days to file a claim in US Tax Court. The failure to file a claim in Tax Court results in the tax being assessed.
The IRS may request that you execute a Consent to Extend the Time to Assess Tax (Form 872) during the Coronavirus Pandemic. The Form 872 provides the government with extra time to audit. There are pros and cons to executing a Consent to Extend Time to Assess a Tax. I advise that you seek advice from a tax attorney if the IRS requests extra time.
What if I’m Appealing my Tax Case?
Although Appeals is not currently holding in-person conferences with taxpayers, conferences are held by telephone and videoconference. Therefore, you must respond to any outstanding requests for information.
Contact Tax Attorney, Todd Unger Today
It’s hard to think about dealing with taxes during the COVID-19 outbreak. The Law Office of Todd S. Unger, Esq. is here to help. Todd Unger is conducting teleconferences with clients who need assistance during this time. To resolve any ongoing tax audits or tax levies, call tax attorney, Todd Unger today (877) 544-4743.