2020 has been a difficult year. The COVID-19 pandemic has hampered millions of Americans’ finances, but that is not the only outside force that has rocked our nation. Like the west coast fires and the unusually severe hurricane season, natural disasters have compounded to make this year a stressful one.
Thankfully, the Internal Revenue Service (IRS) has unveiled a new program to help people struggling to pay back their tax balance.
What is This New Program?
In March of this year, the IRS announced the People First Initiative (PFI). This program suspended tax collection efforts and provided payment relief for people who lost their incomes during the shutdown. However, these provisions expired on July 15, 2020.
Now, the IRS has introduced the Taxpayer Relief Initiative (TRI). This new set of policies aims to alleviate the cumulative financial strain the pandemic has placed on millions of families.
The IRS has made changes to their collections procedures to give individuals and families more flexibility during this unprecedented year. The agency will be offering a wider variety of payment plans and extended deadlines, in addition to the options available in years past.
Who is This Available To?
This initiative aims to simplify the process of repaying one’s tax liability. The revised collections procedures will be beneficial to millions of families, particularly those who have a history of paying their taxes on time.
You will need to file your tax returns for 2019 to be considered. These modifications do not apply to cases that are already in Field Collection and have an assigned Revenue Officer.
What Changes Does the TRI Introduce?
There are 6 main adjustments to the collections procedure that have been announced with the TRI. Here they are, and what they mean for taxpayers:
- Taxpayers who qualify for a short-term payment plan may now have up to 180 days to resolve their tax liabilities instead of 120 days.
In past years, the IRS only offered short-term payment plans for a period of 4 months or 120 days. Now, you’ll have 6 months.
This extended deadline will give people more time to pay off their debts before the IRS begins the collections process for those who request an extension to full-pay their liability.
- The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
An Offer in Compromise (OIC) is striking a deal with the IRS to pay less than you owe which is based on your financial ability to repay the debt and your equity in assets. Once the Offer is accepted, you must comply with the repayment terms as outlined in the offer.
Taxpayers who have already entered an OIC agreement will now have added leniency in the terms of their deal.
Generally, if you miss a monthly payment, your OIC is immediately voided. However, recognizing that many people are under an immense financial strain, the IRS will not be so quick to nullify these agreements.
If an OIC sounds like it would be right for your family, you can try the Pre-Qualifier tool to see if you’re eligible.
- The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and business taxpayers who have gone out of business.
As we move into 2021, many people will still be feeling the economic effects of this year. If you spent months gathering pay stubs, submitting documents, and waiting on judgments from the IRS, jumping back into tax season again can feel cruel and unusual.
Under the TRI, you may not have to resubmit updated financial information if you can propose a new payment under the extended repayment terms.
- Certain qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement if their monthly payment proposal is sufficient.
This is a significant change in the way the IRS handles Installment Agreements. Essentially, it streamlines the approval process so taxpayers don’t have to disclose all of their financial information if they can pay the debt back over the statute of limitations of the debt.
Previously if you owed over $100,000 in tax liability, you had to provide a financial statement which, required a full rundown of your current income, expenses, assets, and liabilities. Now, the dreaded financial statement can be avoided for cases under $250,000 if the taxpayer proposes the approved minimum payment plan over the statute of limitations of the debt.This change will be especially beneficial for people who were high-income earners and high net worth individuals who do not want to disclose their financial information or do not want a payment plan based on their ability to pay which may be higher than the minimum payment.
- Some individual taxpayers who only owe for the 2019 tax year and owe less than $250,000 may qualify to set up an Installment Agreement without a notice of federal tax lien filed by the IRS.
This is another huge policy change. Normally, a taxpayer can only avoid a lien if their assessed balance is under $50,000 and they set up a direct debit installment agreement to pay the debt over 72 months before the lien is filed. Now if you just owe for 2019 and owe less than $250,000 you can avoid a lien by setting up a minimum payment plan over the statute of limitations of the debt which is a huge relief to taxpayers.
A lien is filed with the superior court clerk in your county, and it acts as a “heads-up” to potential lenders.
A lien technically covers everything you own – your car, your house, even the beer in your fridge. It tells creditors that you are a potential risk and can make it extremely difficult to take out a loan, be approved for a lease, etc.
Now, you can set-up a payment plan without automatically incurring a lien.
- Qualified taxpayers with existing Direct Debit Installment Agreements may be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates
If you already have a payment plan, you can now make certain changes to it yourself. If you need to adjust your due date or even the amount of your monthly payment, you can do so.
You can also begin a new Installment Agreement in minutes on IRS.gov. Critically, you also can (and should) make your payments online.
Sunita Lough, IRS Deputy Commissioner for Services and Enforcement, released a report in June stating the agency had a backlog of over 11 million pieces of unopened mail. If you attempt to mail a check to the IRS, they may not open it for months, causing an on-time payment to become late.
What’s My First Step?
Remember, these types of assistance are not automatic. Taxpayers need to request payment relief by calling the number on their balance due notice, responding in writing, or setting-up an agreement on IRS.gov.
When the IRS contacts you, the worst thing you can do is nothing. Ignoring notices will eventually send you straight into collections and could result in a levy or seizure of assets.
Darren Guillot, the IRS’s Deputy Commissioner for Small Business and Self-Employed Collection and Operations Support, says,
“In times like these, dealing with tax issues can be tough.
And we want people to know our employees are committed
to continue helping taxpayers wherever possible, including
offering many options for those struggling to pay their tax bills.”
If you’re overwhelmed, call the IRS, and an agent will go over your options with you. The federal government understands that many people are in dire circumstances, and you may be able to settle your debt for less than you owe.
Of course, as with all legal affairs, taxes can be messy and overwhelming. Sometimes, it’s best to have an expert on your side.
Do You Have an Issue with the IRS or State Tax Authority?
If so, now is the time to speak to an Atlanta based tax attorney who can fight for you. Click here to schedule your appointment to speak to Alyssa Whatley.