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FEDERAL TAX LAW UPDATE

IRS Temporarily Modifies Key Compliance Programs Under People First Initiative

In Information Release 2020-59 (the “Release“), the IRS announced that beginning April 1, 2020, it will provide relief to taxpayers through the suspension of certain compliance programs and ease of payment guidelines through its People First Initiative. Specifically, the Release provides that beginning April 1, 2020, through at least July 15, 2020 (the “Suspension Period“), the IRS will be modifying the following activities:

Existing Installment Agreements

  • For taxpayers with an existing installment agreement, the IRS is suspending installment agreement payments during the Suspension Period; however, the interest will continue to accrue on any unpaid balances. In addition, the IRS will not default any installment agreements during the Suspension Period.

New Installment Agreements

  • Taxpayers unable to fully pay their federal taxes can continue to resolve outstanding liabilities by entering into a monthly payment agreement with the IRS during the Suspension Period.

Offers in Compromise (“OIC”)

  • Pending OIC Applications. The IRS will allow taxpayers until July 15, 2020, to provide additional information requested by the IRS to support a pending OIC. Further, the IRS will not close any pending OIC request before July 15, 2020, without the taxpayer’s consent.
  • OIC Payments. The IRS is providing taxpayers the option of suspending all payments on accepted OICs until July 15, 2020, although the legally required interest will continue to accrue on any unpaid balances.
  • Delinquent Return Filings. The IRS will not default on an OIC for those taxpayers who are delinquent in filing their tax return for tax year 2018. However, the IRS provides that taxpayers should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020.
  • New OIC Applications. Taxpayers with an outstanding tax liability that exceeds their net worth may be able to resolve that liability using the OIC process during the Suspension Period.

Collection Activities 

  • Field Collection Activities. IRS field revenue officers will not initiate liens and levies (including any seizures of a personal residence) during the Suspension Period. However, the IRS will continue to pursue high-income non-filers.
  • Automated Liens and Levies. The IRS will not be issuing new automatic, systemic liens and levies during the Suspension Period.
  • Passport Certifications to the State Department. The IRS will not send new certifications to the State Department for taxpayers with an outstanding tax liability in excess of $52,000 (“Seriously Delinquent Tax Debt”) during the Suspension Period. Taxpayers with Seriously Delinquent Tax Debt are encouraged by the IRS to request an installment agreement or, if applicable, an OIC to resolve their outstanding tax liability.
  • Private Debt Collection. The IRS will not send new delinquent accounts to private collection agencies to pursue during the Suspension Period.

Audit/Review/Statute of Limitations

  • New Field, Office and Correspondence Audits. During the Suspension Period, the IRS generally will not start new field, office and correspondence audits. However, the IRS may start new audits when necessary to protect the government’s interest in preserving the applicable statute of limitations. In addition, in instances where it is in the best interest of both the IRS and the taxpayer, the IRS may move forward with a new audit during the Suspension Period with the understanding that COVID-19 developments could later reduce audit activities for an agreed period.
  • Existing Field, Office and Correspondence Audits. The IRS will continue to suspend in-person meetings for current field, office and correspondence audits. However, where possible, IRS examiners will continue audits remotely. The IRS requests taxpayers with open audits to respond to any requests for information from examiners that they have already received, and any that they may receive, to the extent possible.
  • Earned Income Tax Credit and Wage Verification Reviews. Taxpayers will have until July 15, 2020, to submit verification to the IRS that they qualify for the Earned Income Tax Credit or verification of their income. These taxpayers should exercise their best efforts to obtain and submit all requested information, and if unable to do so, to contact the IRS indicating the reason such information is not available. Until July 15, 2020, the IRS will not deny these credits for a failure to provide requested information.
  • Independent Office of Appeals (“IOA”). The IOA employees will continue to work cases during the Suspension Period. The IOA is not currently holding in-person conferences with taxpayers; however, conferences may be held over the telephone or by video conference. The IRS requests that taxpayers with cases in the IOA promptly respond to any IOA requests for information.
  • Statute of Limitations. The IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where a statute might expire during the Suspension Period, the IRS requests that taxpayers cooperate in extending such statutes. Otherwise, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the government’s interests in preserving such statutes. Where a statutory period is not set to expire during 2020, the IRS is unlikely to pursue an extension or issue a deficiency notice until at least July 15, 2020.

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