WHAT TO DO IF YOU ARE RECEIVING COLLECTION NOTICES FROM THE IRS, BUT CANNOT PAY YOUR FEDERAL TAX LIABILITIES BECAUSE OF COVID-19

On: September 3, 2020

One of the worst feelings when opening your mail is to receive an Internal Revenue Service collection notice. The pressure in responding to an IRS collection notice has only increased for many taxpayers because of the adverse economic conditions caused by COVID-19.

What should you do if you are receiving collection notices from the IRS, but cannot pay your Federal tax liabilities because of COVID-19?

IRS Suspends Many Collection Activities Through July 15, 2020

Fortunately, the Internal Revenue Service has offered taxpayers some relief from collection activities. Specifically, the IRS, on March 25, 2020, as part of its “People First Initiative”, suspended many collection activities through July 15, 2020.

First, liens and levies (including any seizures of a personal residence) by field revenue officers will be suspended through July 15, 2020.

Second, new automatic, systemic liens and levies will be suspended through July 15, 2020. Third, new delinquent accounts will not be forwarded by the IRS to private collection agencies through July 15, 2020.

Fourth, the IRS will suspend new passport certifications (which could result in loss of a passport) to the Department of State for “seriously delinquent” taxpayers through July 15, 2020.

Fifth, the IRS will not deny any earned income tax credits for failure to provide requested information until July 15, 2020.

Certain IRS Collection Activities Are Continuing

The Internal Revenue Service, on March 25, 2020, as part of its “People First Initiative”, did announce that certain collection activities are continuing.

First, the IRS advised that field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.

Second, the IRS advised that it will issue Notices of Deficiency and pursue other similar actions to avoid the expirations of statute of limitations. Taxpayers are encouraged by the IRS to cooperate in extending statute of limitations. However, the IRS is unlikely to pursue the above-described actions until at least July 15, 2020 when a statute of limitations will not expire during 2020.

Use Suspension Time To Prepare For Post-Suspension Collection Activity

It is important to remember that the suspension of collection activity is not the same as the elimination of collection activity. Unless the Internal Revenue Service extends the suspension period beyond July 15, 2020, the IRS likely will resume collection activity immediately after July 15, 2020.

Thus, taxpayers should use this “cease-fire” time to prepare for the future “war” of collection activity. Because interest continues to accrue during the suspension period, if you financially can make some payment to the IRS, you should do so now to reduce your ultimate indebtedness to the IRS.

If there are documents or other information you need to gather, you should do so now to be ready to respond to IRS collection activity.

If there are decisions you need to make concerning possible options to settle your Federal tax liabilities (such as installment agreements or offers in compromise), you should do so now to be ready to implement those decisions after July 15, 2020.

The key is not to be inactive during the suspension period.

If you need tax help, always make sure to call Leading Tax Group and don’t attempt to do it yourself.