IRS Liens Away From Many Repayment Requirements to Ease Taxpayers’ Burden During COVID-19 Pandemic

November 5, 2020

On Monday, November 2, the IRS announced a new initiative to help taxpayers who owe taxes to the IRS, but are also feeling the economic pain of the ongoing COVID-19 pandemic. Following up on the “People First Initiative” announced earlier this year, the IRS is now relaxing requirements related to short- and long-term payment plans, offers in compromise and relief from penalties.

Unlike the People First Initiative, the information released by the IRS regarding the new changes does not provide a date on which the changes will expire. This should provide some comfort for taxpayers looking for options to address IRS debt.

The IRS will now:

  • Provide additional time for taxpayers to pay in full their debt under a short-term payment plan (also known as an extension of time to pay), increasing the deadline from 120 days to 180 days.
  • Automatically add new balances to existing payment plans for individuals and out-of-business entities. In the past, if a taxpayer was in a payment plan and filed a return with a balance due, the IRS would generally default the payment plan. The taxpayer would then have to work with the IRS to reinstate the plan, potentially involving new financial documentation, and pay another fee to set up the plan.
  • Allow “certain qualified individual taxpayers” who owe less than $250,000 to set up a payment plan without providing a financial statement and supporting documentation, as long as the proposed monthly payment is sufficient to pay the balance in full. There was no clarification offered regarding the “certain qualifications,” but this is still a significant relaxing of requirements on the part of the IRS. Currently, the IRS requires a full financial statement and documentation supporting income and expenses for any taxpayer owing more than $100,000, or those who owe less but believe that they cannot pay monthly an amount that will pay in full the debt within the ten-year deadline for collections.
  • Refrain from filing a notice of federal tax lien when certain individual taxpayers enter into a payment plan to pay only a 2019 balance of less than $250,000. Again, there is no further information on the qualification requirements for this change, however, this should provide a great amount of relief for many. The federal tax lien is often one of the greatest concerns for taxpayers who owe money to the IRS. Currently, individual taxpayers who owe back taxes can avoid the filing of a lien only if they owe less than $50,000 and agree to a direct debit payment plan that will pay off their debt within 72 months.
  • Allow “qualified taxpayers” who are in existing direct debit payment plans to lower their monthly payment amount and change their monthly due date using the IRS’s Online Payment Agreement system on the IRS website.
  • Offer unspecified flexibility in payment terms for those who are struggling to pay the agreed-upon payments under an accepted Offer in Compromise.

The IRS also highlights in the release existing procedures that may be helpful to taxpayers who owe, including penalty abatements due to reasonable cause, and the temporary hold on collection action through its “Currently Not Collectible” program.

Through this new initiative, the IRS is attempting to show that it continues to be sympathetic to the struggles that many American taxpayers are experiencing during the COVID pandemic while emphasizing that its employees can assist taxpayers in easing the burden of paying their back taxes. Darren Guillot, the Deputy Commissioner of collections and operations for the Small Business/Self-Employed division of the IRS, stated “[i]f you’re having a tax issue, don’t go silent. Please don’t ignore the notice arriving in your mailbox. These problems don’t get better with time.”

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