On Monday, March 30th, the IRS began to implement actions to pause collection activities for many taxpayers to help alleviate economic pressures due to the current COVID-19 related crisis. Please click here to view the memorandum by the Director of Headquarters Collection, Frederick Schindler. Marty Davidoff, the Partner-In-Charge of our Tax Controversy Department was a co-presenter with Mr. Schindler at an IRS Working Together Forum in January. The IRS memorandum is geared as a message to the employees of the IRS and, accordingly, is clear and concise. Here are the highlights:
- If you are in an installment agreement, you may suspend making any payments normally due between April 1 and July 15, 2020. This may be three or four payments depending upon when your payment would normally be due. Although the IRS will allow such suspension without terminating the agreement, interest will continue to accrue at a rate of 5% per year. And, in many cases an additional charge for late payment of ¼ to ½ percent per month will also be added to the balance.
- Some have inquired as to how one can suspend payments if they are in a Direct Debit Installment Agreement (“DDIA”). Normally, one would call the IRS 800 phone numbers. However, no one is there to answer your call at this point. What should one do? Contact your bank as soon as possible and ask them to stop the direct debits altogether. Some banks may take this information over the phone. Others will require written instructions to stop such payments. Our advice would be to ask your bank the best manner to communicate your desire to stop the payments. Some banks may require as least two weeks’ notice. Please let us know what your experience is by e-mailing us at IRSTaxHelp@pragermetis.com. Also, the IRS has established FAQs with respect to DDIAs on their website which can be found here: click here
- If you choose to suspend payments on your DDIA, what happens after July 15, 2020? There are several practical possibilities. If your financial situation has changed permanently, we can assist you in renegotiating your installment agreements. If you have recovered fully, or merely wish to start-up the payments again, one option is to simply ask your bank to resume the direct debit. This may not be an option at all banks. Other options are to make your post-July 15, 2020 payments via Direct Pay on the IRS website (https://www.irs.gov/payments/direct-pay), through the Electronic Federal Tax Payment System at eftps.gov (our favorite, but you need to register about 30 days in advance) or by sending via snail mail (not recommended).
- For those who have been targets of IRS collection but are not yet in an installment agreement, the IRS is suspending levy, garnishment, seizures of property, civil suit proceedings and lien filings through July 15, 2020. This is a great opportunity to prepare to assembly documentation and prepare your financial disclosure package to secure a collection alternative (installment agreement, offer in compromise, or currently not collectible status).
- If you are a non-filer, this is a great time to get your records together and get us your information to prepare and file your income tax returns. Many states offer generous voluntary disclosure programs, and we can offer strategies on how to best deal with your IRS issues.
- Revenue Officers in the field will be able to establish new installment agreements for those who wish to enter into such agreements.