If You Owe the IRS, They Have Tossed You a Bone

On November 2, 2020, the IRS announced relief measures for taxpayers with tax debti. With the pandemic cited as the primary reason, the IRS initiated some new measures to help taxpayers to clear or reduce their tax debt.

The IRS has always offered help through payment plans and other tools, but these new measures are intended to offer more help for those taxpayers struggling with income and debt during the pandemic.

Some of the highlights are:

  • The IRS has increased the time to resolve tax liabilities under the short-term payment plan option from 120 days to 180 days.
  • Taxpayers unable to meet the payment terms of an accepted Offer in Compromise are being offered more flexibility.
  • Some new tax balances can now be automatically added to existing installment agreements for individual and out of business taxpayers. In the past new tax balances often resulted in the default of the original agreement.
  • Qualified individual taxpayers who owe less than $250,000 can now set up installment agreements without providing a financial statement or substantiation if their monthly payment proposal is accepted.
  • Taxpayers who owe only for the 2019 tax year and who owe less than $250,000 may be allowed to set up an installment agreement without a notice of a federal tax lien filed by the IRS.
  • Qualified taxpayers with current Direct Debit Installment Agreements may be allowed to use the Online Payment Agreement system to propose a lower monthly payment amount or to change their payment due dates.

Payment Plan Options Offered by the IRS

Both short and long-term options are offered for repayment of tax debt. Installment Agreements via the Online Payment Agreement System (OPA) are available to individuals who owe $50,000 or less in combined taxes, penalties, and interest. Businesses that owe less than $25,000 and have filed all tax returns are also eligible. Installment Agreements are available for eligible taxpayers who cannot afford to pay their tax bill in full.

Other IRS Assistance for Taxpayers

  • Offer in Compromise – Certain taxpayers may qualify to settle their tax debt for less than the total they owe. They do so through an Offer in Compromise. There is an online tool, the Offer in Compromise Pre-Qualifier to determine eligibility. Taxpayers temporarily unable to meet the terms of a current Offer in Compromise can get additional flexibility from the IRS under the new rules.
  • Temporarily Delayed Collection – Especially during these pandemic times, this relief can be helpful. A taxpayer can contact the IRS to request a temporary delay of the collection process. It may be granted if there is a probability that the financial situation of the taxpayer is likely to improve.
  • Penalty Relief – It the IRS finds that there is reasonable cause for failure to pay taxes due, the taxpayer may be granted first-time penalty abatement relief.

If you owe back taxes or receive a notice from the IRS, do not ignore the issue. There is more relief available now than before in helping delinquent taxpayers to clear their liability with the IRS.

i IRS makes it easier to set up payment agreements; offers other relief to taxpayers struggling with tax debts, IR-2020-248

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