On March 25, 2020, the IRS announced a new program called the People First Initiative designed to assist taxpayers facing challenges related to COVID-19. The IRS previously provided relief by extending the due date for filing personal and certain business returns and related tax payments.
The People First Initiative touches on a number of IRS actions with a focus on reducing, postponing, and modifying certain collection and audit activities. The Initiative is projected to start on April 1, 2020 and will initially run through July 15, 2020.
For taxpayers under an existing installment agreement, payments due under that agreement between April 1 and July 15, 2020 are suspended. The IRS will not default any installment agreements during this period. This applies to installment agreements set up as direct deposits as well. Interest will continue to accrue on any unpaid balances.
Existing Offers in Compromise
For taxpayers who have entered into an offer in compromise, payments can be suspended through July 15, 2020. Interest will continue to accrue during that time period. One of the requirements for entering into and maintaining an offer in compromise is that all tax returns and estimated payments must be filed and made on a timely basis. Until July 15, 2020, the IRS is relaxing this requirement and they will not default offers in compromise for taxpayers who are delinquent in filing their 2018 tax return.
As it stands, taxpayers must file their 2018 return by July 15, 2020, to maintain compliance under existing offers in compromise. Taxpayers must also file their 2019 return by July 15, 2020, to maintain compliance. It is unclear at this time if there will be any relief for estimated payments for those taxpayers required to make them. Unless and until we receive guidance on this, taxpayers must continue to make any required estimated payments to maintain eligibility under existing offers in compromise.
Pending Offers in Compromise
Offer in compromise applications typically involve providing a substantial number of documents to the IRS. For any taxpayers with a pending offer in compromise application, the IRS is allowing taxpayers until July 15, 2020, to comply with any IRS requests for additional information. Additionally, the IRS will not close any pending offer in compromise applications before July 15, 2020 without the taxpayer’s consent.
Liens and Levies
Once certain requirements have been met, the IRS has the right to place liens on and seize certain property of taxpayers with outstanding tax balances. Until July 15, 2020, liens and levies initiated by revenue officers will be suspended.
The IRS does warn, however, that its revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted. In addition to liens and levies initiated by revenue officers, the IRS also creates automatic liens and levies in certain cases. These automatic liens and levies also will not be generated until July 15, 2020.
Private Debt Collection
The IRS is authorized to forward certain delinquent accounts to third party collection agencies. As part of the Initiative, no new delinquent accounts will be forwarded during this period.
The IRS will generally not initiate any new audits during this time. However, the IRS may start new examinations where they deem it necessary to protect the government’s interest in preserving the statute of limitations. For current examinations, IRS examiners will continue with their audits on a remote basis, if possible.
No in-person meetings will take place. To help facilitate this remote aspect, the IRS is encouraging taxpayers to comply with all requests for information if able to do so. The IRS also understands that there may be situations where a taxpayer may want to begin an examination while people and records are available (particularly in the case of businesses). The IRS will work with those taxpayers when it is in the best interest of both parties to move forward with an examination if possible, understanding that further COVID-19 developments might necessitate delays.
Earned Income Tax Credit and Wage Verification
The IRS often requests additional information from taxpayers taking the earned income tax credit - usually to verify wage and dependent information. If you have received a request for this information, you have until July 15, 2020 to respond (if an earlier time was specified). The IRS will not deny these credits for a failure to provide the requested information if the information is received by July 15, 2020.
If you have a matter with the Appeals Office, those officers will continue to work their cases during this time period. Officers are not currently allowed to take in-person meetings, but they will hold conferences via telephone. The IRS encourages taxpayers to continue to promptly respond to any outstanding requests for information for all cases with the Appeals Office.
Statute of Limitations
For cases where a given statute of limitations may soon expire, the IRS notes that it will take whatever steps are necessary to protect its rights, including issuing notices of deficiency. The IRS notes, however, that it is not likely to issue any notices of deficiency until July 15, 2020, where the statute of limitations is not set to expire during 2020.
Davis Brown will be keep you updated as further program details are shared. If you have any questions regarding how the People First Initiative may affect you, please reach out to your attorney.
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