As most people are aware, the 2019 income tax filing and payment deadlines for all taxpayers who file and pay their federal income taxes on April 15, 2020, were automatically extended until July 15, 2020. This relief is automatic and generally applies to all individual, trust and corporation tax returns. Additionally, this relief extends to estimated tax payments for tax year 2020 that were due on April 15, 2020.
People First Initiative
Additionally, the People First Initiative offered taxpayers who owed taxes some further relief. IRS Commissioner Chuck Rettig stated relative to the People First Initiative:
“In addition to extending tax deadlines and working on new legislation, the IRS is pursuing unprecedented actions to ease the burden on people facing tax issues. During this difficult time, we want people working together, focused on their well-being, helping each other and others less fortunate.”
In particular, the People First Initiative offered taxpayers the following joy:
Existing Installment Agreements
For taxpayers under an existing installment agreement, payments due between April 1, 2020 and July 15, 2020 were suspended (although interest continued to accrue on any unpaid balances).
Offers in Compromise
For taxpayers, with an Offer In Compromise (“OIC”) pending on April 1, 2020, the IRS extended the deadline to provide any requested additional information to support the OIC to July 15, 2020. In addition, the IRS agreed not to close any pending OIC request before July 15, 2020 without the express consent of the taxpayer. Additionally, the IRS granted taxpayers the option of suspending all payments on previously accepted OICs until July 15, 2020 (although interest continued to accrue on any unpaid balances). Lastly, the IRS agreed that it will not hold taxpayers in default of an OIC if they are delinquent in filing their federal income tax return for tax year 2018 as long as they file both their 2018 and 2019 returns on or before July 15, 2020.
For taxpayers in IRS collections, they were allowed some relief. Liens and levies (including any seizures of a personal residence) initiated by IRS field revenue officers were suspended from April 1, 2020 through July 15, 2020. IRS field revenue officers, however, were allowed to continue pursuing high-income non-filers and perform other similar activities. Additionally, any new automatic, systemic liens and levies were suspended during this same period. Finally, during this period, any new delinquent taxpayer accounts were not forwarded by the IRS to private collection agencies.
IRS Announcement 2020-142
All of the joy brought to taxpayers by the People First Initiative is about to come to an abrupt end. As the IRS publicly states in Announcement 2020-142, despite the continuing hardship created by the COVID-19 pandemic, the relief granted to taxpayers by the People First Initiative ends a week from today (i.e., July 15, 2020).
Put simply, this means:
- For taxpayers who had installment payments suspended, they need to resume making payments under their installment agreement by the first monthly payment date that falls after July 15, 2020. Of course, any taxpayer that cannot meet the terms of their installment agreement can seek to change its terms, but they should do so immediately by contacting the IRS.
- For taxpayers with already accepted OICs that did not make required payments during the relief period, they need to resume making required payments by July 15, 2020.
- Practice Alert: These taxpayers are required to make up any missed payments by this same date.
- For taxpayers with pending OICs (a submitted OIC that has not yet been accepted by the IRS), they need to resume making any required payments under the pending OIC by July 15, 2020. The IRS will revise the OIC to allow these taxpayers (provided the OIC is accepted) to make up any payments skipped during the relief period at the end of the offer period.
- For taxpayers with delinquent accounts, they need to be aware that the IRS will recommence forwarding accounts to private debt collection agencies starting July 15, 2020.
While the story of the pied piper took place in the 1200s, the moral to the story applies today. As of July 15, 2020, the IRS will be back in business, including its collections function. “He who pays the piper calls the tune.”
Larry J. Brant
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, But It Isn’t Free of Potholes," 2022 Oregon Tax InstitutePortland, OR, 6.2.22
- "Revisiting Choice of Entity in Light of Tax Changes on the Horizon," 2022 OSCPA Farming, Ranching & Agribusiness ConferenceBend, OR, 6.3.22
- "Oregon Real Estate Tax Update – A Review of Recent Income Tax Developments in Oregon Impacting Real Estate Investors," 2022 OSCPA Annual Real Estate Tax ConferencePortland, OR, 6.8.22
- "The Intersection of Code Section 1031 and Opportunity Zones," 2022 OSCPA Northwest Federal Tax Conference10.24.22