Much has been written about extending the deadline to file and pay federal income taxes until July 15, 2020. The IRS has also extended filing and payment deadlines for other taxpayers. These extensions should ease the burden of filing and paying taxes on most if not all taxpayers.
From our perspective as tax litigation and tax controversy attorneys the bigger story affecting our clients is the People First Initiative. I know. It sounds like something that the Chinese Communist Party came up with. : )
In addition to extending deadlines to file taxes as outlined above, the IRS is also allowing taxpayers with Installment Agreements and Offers in Compromise (OIC) to suspend payments during this time. For taxpayers with Installment Agreements, payments due between April 1 and July 15, 2020 are suspended. Taxpayers who have direct debt installment agreements must contact the IRS to prevent the debits from being made. Additionally, taxpayers who cannot meet the terms of their Installment Payment Agreement can suspend payments during this time if they choose to do so. Taxpayers with OIC’s can choose to suspend all payments until July 15, 2020.
Taxpayers with unpaid balances in both Installment Agreements and OIC’s will not default for not making payments or filing their 2019 tax return until July 15, 2020. However, taxpayers with unpaid balances should note that interest continues to accrue on any unpaid balance. That is one reason why taxpayers who can afford to do so may wish to continue making payments.
In addition to easing the pressure on taxpayers with regards to filing and Installment Agreements and OIC’s, the IRS is also suspending certain enforced collection actions as well as slowing down their tax audit procedures. The People First Initiative suspends the issuance of new automatic, systemic liens and levies through July 15th. IRS Revenue Officers will also not issue new tax liens or tax levies. Additionally, the IRS is suspending issuing new passport certifications during this time as well. However, if the IRS has already certified an individual as a seriously delinquent taxpayer, action will need to be taken to have the account decertified.
With regards to tax audits, the IRS has stated they generally will not begin new tax audits at this time, but ongoing tax audits may continue. There will, however, be no in-person contact. Despite the IRS’s general statement that they will not start new audits, they have specified that some individuals and business may be subject to new examinations to preserve the statute of limitations. We have already had one experience with IRS Revenue Agent who issued an audit letter on March 30th, immediately before the effective date of the tax audit, and has refused to withdraw the letter despite the fact that there is no statute issue. The IRS Independent Office of Appeals is also continuing to operate. Most if not all Appeals Officers are set up to work remotely. Of course, there will be not be any in-person meetings. These changes provide some relief for taxpayers and business during the coronavirus epidemic as well as provide for the safety of IRS personnel by meeting remotely.
Even though the People First initiative gives taxpayers a break, taxpayers should seriously consider taking action now with respect to on-going audits, as well as collection issues. The protections are in place only until July 15th. After that date, things will go back to normal. (As we say in Latin—the status quo ante.) It seems unlikely that IRS personnel will be sympathetic to requests for delays, when – they will argue—the taxpayer has had over 3 and half months to prepare.
If you have questions about this, or any other tax dispute topic please contact us. Stay safe!