IRS Adjusts Collection Policies

The IRS is adjusting some of its collection policies to help indebted taxpayers hurt by the coronavirus pandemic.

The agency said it recently assessed its collection methods and is “expanding taxpayer options for making payments and alternatives to resolve balances owed.”

The new IRS Taxpayer Relief Initiative increases taxpayers’ options to seek help through payment plans and other tools the agency already offers.

The initiative will help taxpayers, especially those with a record of filing returns and paying taxes on time, the IRS said.

Highlights

Among the highlights are:

• Taxpayers who qualify for a short-term payment plan option may now have up to 180 days to resolve their tax liabilities instead of 120 days
• The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted offer in compromise
• The IRS will automatically add certain new tax balances to existing installment agreements for individual and out-of-business taxpayers instead of defaulting the agreement, which can complicate matters for those trying to pay their taxes
• To reduce burden, certain qualified individual taxpayers who owe less than $250,000 may set up installment agreements without providing a financial statement or substantiation if their monthly payment proposal is sufficient 
• Some individual taxpayers who only owe for the 2019 tax year and who owe less than $250,000 may qualify to set up an installment agreement without a notice of federal tax lien filed by the IRS
• Additionally, qualified taxpayers with existing direct debit installment agreements may now be able to use the online payment agreement system to propose lower monthly payment amounts and change their payment due dates

Installment Options

IRS Commissioner Chuck Rettig said the agency “understands that many taxpayers face challenges, and we’re working hard to help people facing issues paying their tax bills.”

The IRS is also offering options for short- and long-term payment plans, including installment agreements via the online payment agreement system.

This service is generally available to individuals who owe $50,000 or less in combined income tax, penalties, and interest, or businesses that owe $25,000 or less combined that have filed all tax returns.

Short-term payment plans can now be extended from 120 to 180 days for certain taxpayers.

The short-term payment plans can now be extended from 120 to 180 days for certain taxpayers, the agency said.

Installment agreement options are available for taxpayers who cannot pay their full balance but can pay it over time.

The IRS expanded installment agreement options to remove the requirement for financial statements and substantiation in more circumstances for balances owed up to $250,000 if the monthly payment proposal is sufficient.

The IRS also modified installment agreement procedures to further limit requirements for federal tax lien determinations for some taxpayers who only owe for tax year 2019.

Options

The IRS also offers these measures for taxpayers who owe:

• Temporarily delaying collection: Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves.
• Offer in compromise: Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. To help determine eligibility, use the offer in compromise pre-qualifier tool. Now, the IRS is offering additional flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted offer in compromise.
• Relief from penalties: The IRS is highlighting reasonable cause assistance available for taxpayers with failure to file, pay, and deposit penalties.

Penalty Relief

First-time penalty abatement relief is also available for the first time a taxpayer is subject to one or more of these tax penalties.

Many taxpayers requesting payment plans, including installment agreements, can apply through the agency’s website without having to talk to a representative.

Other requests can be made by contacting the number on the taxpayer’s notice or responding in writing.

#IRS approves temporary use of e-signatures for certain forms and recommends taxpayers consider e-filing forms whenever possible to reduce risks of exposure to COVID-19. https://t.co/g9k3dZr3PV #COVIDreliefIRS pic.twitter.com/HNLlAfwD0p

— IRS Small Biz (@IRSsmallbiz) November 18, 2020

However, to request relief, the IRS reminds taxpayers they must be responsive when they receive a balance due notice.

“If you’re having a tax issue, don’t go silent. Please don’t ignore the notice arriving in your mailbox,” said Darren Guillot, the IRS Small Business/Self-Employed Deputy Commissioner for Collection and Operations Support.

“These problems don’t get better with time. We understand tax issues and know that dealing with the IRS can be intimidating, but our employees really are here to help.”

Here is more information and background on the collection relief and procedures.