December 16, 2020
Recently, the IRS announced a new Taxpayer Relief Initiative in response to the financial hardships that some individuals and businesses are undergoing due to the COVID-19 pandemic. Since millions of individual taxpayers are dealing with unemployment, and businesses are suffering from lowered revenue due to a lack of clients and customers, the IRS has chosen to put a number of measures in place that either allow taxpayers to have more time to pay or, in some cases, have their balances cancelled altogether. This plan, called the Taxpayer Relief Initiative is designed to help them avoid suffering from additional financial difficulties due to unpaid tax debts.
New Initiative Due to COVID-19
The COVID-19 pandemic has undoubtedly turned the economy upside down. With millions of people out of work, companies struggling to keep their doors open, and an unemployment rate approaching 10%, the IRS realized that some additional measures needed to be taken. As a result, they developed a way to create less of a burden on taxpayers, both individuals and businesses, who currently owe money to the IRS. These measures are meant to provide some relief and hopefully give the economy time to improve, while at the same time, they still allow the IRS to make it clear that taxpayers owe them money. While the debts won’t be forgiven, a number of important measures are included in order to help those who are struggling right now.
What the Taxpayer Relief Initiative Includes
The taxpayer relief initiative created by the IRS includes a number of crucial components designed to alleviate the burden that struggling businesses and individuals currently face due to COVID-19. Some of the options built into the plan are:
- Extended Short-Term Payment Plans – Current taxpayers who qualify for a 120-day payment plan can now extend their payments to 180 days. These plans are usually offered to those who owe small amounts and are able to pay them off quickly. However, with the Taxpayer Relief Initiative, they receive an extra 60 days to come up with the total amount of money owed.
- Flexibility for Those with an Offer in Compromise – Those who currently have an offer in compromise in place the IRS now have some extra flexibility when it comes to paying those funds. These offers occur when the taxpayer applies and is approved for an agreement with the IRS that consists of paying a smaller amount than what is owed, in exchange for a lump sum payment or a shortened payment plan. With the new initiative, these taxpayers have more time to meet their agreed-upon obligations to ease their financial burden.
- Installment Agreement Additions – Some taxpayers who currently have payment plans in place with the IRS and now owe a new amount based on their 2019 return can have that new amount due added to their payment plan. This may extend the amount of time required to pay or raise the monthly payment amounts, but it does prevent new collection efforts from occurring.
- No Financial Statement Payment Plan – In the past, a financial statement was needed to set up a payment plan with the IRS. Under these new measures, anyone who owes less than $250,000 for 2019 and is able to make substantial monthly payments to the IRS can request a payment plan without having to provide this financial statement.
- Installment Agreements without a Federal Tax Lien in Place – Speaking of installment agreements, having a federal tax lien placed on the taxpayer’s property is no longer a requirement of a payment plan. This applies to qualifying taxpayers who currently owe less than $250,000 for 2019.
- Proposed Lower Monthly Payments – Taxpayers who are currently participating in a monthly payment plan with the IRS and allow for their payments to be debited directly from their bank accounts can propose temporary lower payment amounts due to hardship.
Other Relief Options for Taxpayers Who Owe the IRS
On top of offering the measures included in the Taxpayer Relief Initiative, the IRS has made it easier to qualify for some of their existing payment and relief options, such as:
- Temporary Relief from Collection Efforts– In some cases, the IRS will stop attempting to collect from qualifying taxpayers for a certain amount of time. This delay can include not having to make payments due to financial hardships. However, once the taxpayer is back on solid financial footing, the IRS collection efforts or payment plan will be back in effect. Since many taxpayers have had financial issues since the start of the pandemic, it’s good that this is still an option for so many.
- Penalty Relief – Taxpayers who have never fallen behind before with their IRS payments, but are now struggling due to the pandemic, may qualify for penalty relief. Officially called Penalty Abatement Relief, they must prove that this is the first time that they have fallen behind on their tax payments. Under an additional option, Reasonable Cause Assistance, they must prove to the IRS that the additional penalties due to a failure to file or to pay their penalties may cause them even more hardships. As a result, the IRS will waive certain penalties and prevent them from accruing.
- Offer in Compromise Options – With an offer in compromise, taxpayers can attempt to settle their debt with the IRS. A lump sum payment for less than the total amount due may be accepted, depending on the circumstances. The taxpayer in question needs to apply for an offer in compromise after completing the pre-qualifier tool. Professional assistance may be required in order to correctly apply and qualify for this option.
Do You Qualify for the Taxpayer Relief Initiative?
The new Taxpayer Relief Initiative is complicated and contains many different options, all of which only apply to qualifying individuals and businesses. On top of that, some of them, such as entering a new payment agreement or applying to have the currently amount lowered, require the taxpayer to go through the application process. This is not something that taxpayers should attempt on their own, as it’s quite possible to make crucial mistakes that prevent you from qualifying. Instead, it’s best to seek out the help of a tax professional, like those at Enterprise Consultants Group, to see if you qualify for one of these options, ensure that communications with the IRS go smoothly, and protect your best interests.
If you think that you may qualify for the IRS taxpayer relief initiative or have questions regarding your situation, then reach out to the tax advisors at Enterprise Consultants Group. We can answer your questions, discuss your rights, and provide actionable options. Please contact us online or at (800) 575-9284 today to schedule a free and confidential consultation to see how we can help you.
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