Seyfarth Synopsis: On March 25, 2020, the Internal Revenue Service (“IRS”) announced its “People First Initiative” (the “Initiative”), which will provide relief to taxpayers by suspending payments under certain collection actions and extending audit and litigation related deadlines until July 15, 2020, in response to the COVID-19 pandemic. Generally speaking, the Initiative provides relief to: (1) taxpayers who have payment obligations under an IRS Installment Payment Agreement (an “IA”) or Offer in Compromise (an “OIC”), (2) taxpayers (other than high-income non-filers) who are or would have been the subject of IRS field collection actions (such as liens and levies) and IRS-initiated private debt collection efforts, and (3) most taxpayers who would have been the subject of a new field, office, and correspondence examination. However, the IRS will continue to: (A) remotely work current appeals cases, field, office, and correspondence examinations, and refund claims where possible, without in-person contact; and (B) take steps where necessary to protect all applicable statutes of limitations and the interests of the government in preserving such statutes.
On March 25, 2020, the IRS issued Information Release 2020-59 (the “Release”) announcing the Initiative and discussing, among other things, the its plans with respect to IAs, OICs, field and automated collection activities, audits, appeals, and efforts to protect applicable statutes of limitations.
1. Installment Agreements
The IRS will permit taxpayers to suspend all IA payments that are due between April 1 and July 15, 2020 (the “Relief Period”) and will not treat a taxpayer as being in default under an IA during the Relief Period. However, interest on unpaid balances will continue to accrue during the Relief Period, hence taxpayers should consider whether to continue or stop their IA payments. It should be noted that the Release does not state how the suspended payments will be accounted for following the Relief Period (e.g., all come due on July 15, or be spread out over post-July 15 payments).
For now the IRS continues to accept new IA applications in accordance with the regular rules.
2. Offers in Compromise
The IRS is also permitting taxpayers to suspend all OIC payments due during the Relief Period. Just as with IAs, interest on unpaid balances will continue to accrue during the Relief Period, hence taxpayers should consider whether to continue or stop their OIC payments. It should be noted that the Release does not state how the suspended payments will be accounted for following the Relief Period (e.g., all come due on July 15, or be spread out over post-July 15 payments). Also, the IRS will not treat a taxpayer as being in default under an OIC solely because the taxpayer is delinquent in filing his, her or its 2018 tax return. However, the taxpayer must file his, her or its 2018 tax return by July 15, 2020.
For taxpayers who are in the process of applying for an OIC, the IRS will allow taxpayers until July 15, 2020 to provide requested additional information to support their application and will not close any OIC application before July 15, 2020 without the taxpayer’s consent.
For now the IRS continues to accept new OIC applications in accordance with the regular rules.
3. Collection Activities
The IRS will suspend all liens and levies (including personal residence seizures) initiated by field revenue officers, all new automatic, systemic liens and levies, and all referral of delinquent accounts to private collection agencies, during the Relief Period. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.
4. Audits and Appeals
The IRS is not suspending current appeals cases, field, office, and correspondence examinations, and refund claims. Instead, the IRS will switch from in-person meetings to remote interaction, such as video or telephone conference.
The IRS will generally not start new field, office and correspondence examinations, with the exception of unique situations when it is in the best interest of both parties to begin an examination and appropriate personnel are available. In addition, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.
5. Other Suspensions
The Release also addresses the suspension of new certifications to the U.S. Department of State for taxpayers who are "seriously delinquent" during the Relief Period and the extension of taxpayers’ time to respond to the IRS to verify that they qualify for the Earned Income Tax Credit or to verify their income (and the IRS will not deny these credits for a failure to provide requested information during the Relief Period).
6. Statute of Limitations
The IRS is clear that it will continue to take steps where necessary to protect all applicable statutes of limitations. If a statute of limitation is set to expire in 2020, the IRS will first seek an agreement with the taxpayer to extend the statute, but if the taxpayer does not cooperate, then the IRS will issue a Notice of Deficiency and pursue other similar actions to protect the interests of the government in preserving the statute of limitations. The IRS is unlikely to pursue the foregoing actions until at least July 15, 2020 in all other cases.
7. Conclusion
The Release represents a continuation of the U.S. Department of Treasury’s and IRS’s efforts to provide relief to taxpayers facing challenges resulting from the novel COVID-19 pandemic. Previously, the U.S. Department of Treasury issued Notices postponing until July 15, 2020 the due date for filing federal income tax returns, paying federal income taxes, filing gift and generation-skipping transfer tax returns, and paying federal gift or generation-skipping transfer taxes. You can read Seyfarth’s coverage of these Notices here, here, and here.
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