IRS to start collecting overdue tax payments as AICPA urges continued relief
The Internal Revenue Service reminded taxpayers Wednesday that they will need to resume paying their taxes on July 15 as its “People First Initiative” to provide tax and penalty relief in response to the novel coronavirus pandemic comes to a close, but the American Institute of CPAs is asking for further tax relief, as an inspector general report sheds light on the unprecedented filing season this year.
July 15 is also the date, of course, when taxpayers will be expected to file their tax returns in this lengthened tax season, unless they file for an extension. The American Institute of CPAs is asking the IRS to continue its tax and penalty relief, however, as the COVID-19 pandemic continues to spread, with record numbers of cases being reported in states across the country.
In a letter, the AICPA urged the IRS to “act immediately to automatically waive failure to file and failure to pay penalties to the millions of taxpayers affected and working through the challenges created by the coronavirus.”
The institute offered a set of recommendations to address the following areas:
- Penalty relief: Currently, taxpayers who fail to file a return or fail to pay an amount shown as tax on the return on or before its due date are subject to a penalty. The AICPA recommends the IRS automatically waive penalties for the 2019 tax year through the extended filing deadline for all taxpayers. In addition, the AICPA is asking that the IRS reassess the impact of the coronavirus during 2021 and determine the appropriateness of offering similar penalty relief for the 2020 tax year.
- Installment agreements: Currently, taxpayers who can’t pay the full amount of tax due in one payment may enter into an agreement with the IRS to pay any tax due in installments. The AICPA recommends the IRS establish an expedited process to approve new installment agreements or modifications of existing installment agreements based on realistic and affordable payment arrangements for taxpayers impacted by the coronavirus.
- Delay in IRS collections: Currently, if taxpayers don’t pay their tax obligation in full at the time it is due, they generally will receive a series of escalating automated notices reminding them of the amount owed, including any penalties and interest accrued, and demanding payment. These notices precede the automated collection process, which continues until the account is satisfied, the case is transferred to a revenue officer or until the IRS is no longer able to legally collect the tax. The AICPA recommends that the IRS continue to halt its automatic collections activities of liens and levies for at least an additional 90 days after July 15. At that time, the AICPA suggested, the IRS should reassess the appropriateness of re-establishing any collection activities.
“The coronavirus pandemic has created a tremendous amount of hardship and uncertainty for taxpayers and their advisers, and for the IRS,” said AICPA vice president of taxation Edward Karl in a statement Wednesday. “We are asking the IRS to do their part to help businesses and individual taxpayers by waiving penalties and delaying collections as the country begins the process of re-opening and operating in only a limited capacity.”
IRS People First Initiative ending
Meanwhile, the IRS reminded taxpayers who took advantage of the People First Initiative tax relief and didn’t make their previously owed tax payments between March 25 to July 15 that they need to restart their payments.
As the IRS continues to reopen its operations across the country, taxpayers who were in payment agreements and skipped any payments from March 25 and July 15 should start paying again to avoid penalties and possible default on their agreements, according to the agency.
“Through the People First Initiative, we have endeavored to provide unprecedented relief to help those who owed federal taxes and allow them extra time,” said IRS commissioner Chuck Rettig in a statement Wednesday. “As we resume a phased-in approach to our normal operations, we are sympathetic to the many Americans still suffering COVID-related hardships and stand ready to continue offering help to those who need it.”
Here’s what taxpayers should do to resume their payment agreements to the IRS, including installment agreements, offers in compromise, and Private Debt Collection program payments:
Installment agreements: Taxpayers who suspended their installment agreement payments between April 1 and July 15, 2020, will need to resume their payments by their first monthly payment due date after July 15. Taxpayers should be aware that the IRS didn’t default their agreement, but interest did accrue, and the balance remained.
Taxpayers who had their bank suspend direct debit payments should contact the bank immediately to ensure their first monthly payment due date occurring on or after July 15, 2020 is sent to avoid penalties.
If a taxpayer can’t meet their current installment agreement terms due to a COVID related hardship, they can revise the agreement on IRS.gov/paymentplan or call the customer service number on their IRS notice if they have a direct debit installment agreement.
Offers in compromise: For pending offers, if the IRS is currently reviewing a taxpayer's submitted offer but hasn’t accepted it yet, the taxpayer should resume their required payments starting July 15, 2020. The IRS will amend the taxpayer's offer to allow them to pay any skipped payments at the end of the offer period, if the offer is accepted.
If a taxpayer has an already-accepted offer in compromise agreement, and the taxpayer was unable to make the payments on their accepted offer because of a COVID-19 hardship, the taxpayer should resume payments and make up the missed payments by July 15, 2020. If the taxpayer is unable to make up the missed payments, they can contact the number on the IRS notice to discuss their situation.
Private debt collection: The IRS did not forward new delinquent accounts to private collection agencies from April 1 through July 15, 2020, and collection agency interaction with taxpayers was limited to inbound telephone calls unless requested by a taxpayer in a voicemail or correspondence.
Taxpayers who had their PCA payments on hold should resume payments by July 15. The IRS encourages taxpayers to work with their assigned PCA to establish a new payment arrangement or restructure an existing one based on their current situation.
Taxpayers who owe but can’t pay. The IRS reminds taxpayers who are experiencing a hardship or who have questions about their payments to call the customer service number provided on their notice but be mindful that wait times could be long. Phone lines remain extremely busy as the IRS resumes operations. Taxpayers also have a variety of options through IRS.gov/payments to make one time or recurring payments without having to contact the IRS.
TIGTA report on ‘unprecedented’ filing season
The Treasury Inspector General for Tax Administration issued a report Wednesday on this year’s historic tax-filing season, noting that it “is unlike any other because the IRS had to take unprecedented and drastic actions to address COVID-19 to protect the health and safety of its employees and the taxpaying public.”
Those actions included closing Taxpayer Assistance Centers, tax processing centers, and offices nationwide. In addition, on March 20, the Treasury Department extended the federal income tax filing due date from April 15, 2020, to July 15, 2020.
TIGTA found that significant coordination and efforts were taken by the IRS to expedite its analysis and reprogramming of systems and to educate individuals on the Economic Impact Payment. The IRS started issuing EIPs on April 10, 2020, only 14 days after passage of the CARES Act, and has issued more than 157 million payments totaling more than $264 billion as of May 21, 2020.
TIGTA found that the IRS correctly computed the payment amount for approximately 98 percent of the more than 157 million payments issued as of May 21, 2020. Nevertheless, some payments were erroneous. The IRS issued 1.2 million payments (less than 1 percent) to prisoners and dead people.
An IRS spokesperson sent Accounting Today a response to the TIGTA report. "During the unprecedented COVID-19 pandemic, the IRS processed more than 126 million individual returns and more than 93 million refunds totaling more than $257 billion," said the IRS statement. "Additionally, in response to the CARES Act directive to issue payments 'as rapidly as possible,' the IRS coordinated delivery of more than 160 million Economic Impact Payments totaling over $270 billion in record time. More than 30 million of these payments were to people who don’t ordinarily have a return filing responsibility. The IRS also created two separate online tools allowing more than 14 million people to successfully provide their banking and filing information, and programmed payment files on behalf of our sister federal agencies. During much of this time, most IRS facilities were closed and more than 56,000 employees were teleworking. Despite the challenges, TIGTA determined that 'the IRS correctly computed the payment amount for approximately 98 percent' of all EIP payments disbursed. The dedicated career employees of the IRS delivered on behalf of the American people during these unprecedented times. Going forward, we continue to be focused on resolving any remaining issues involving Economic Impact Payments. We continue to ask partner groups and others to help us identify eligible individuals, particularly in historically underserved communities, so that we can deliver their payments. Individuals who aren’t required to file a tax return are encouraged to use our Non-Filer tool by Oct. 15 so they can receive an Economic Impact Payment. We also continue to work on the current tax season and are beginning preparations for the 2021 filing season."
The TIGTA report noted that the IRS initiated an education campaign to promote the availability of advanced tax credits for employers. To allow employers to request an advance, the IRS developed Form 7200, "Advance Payment of Employer Credits Due to COVID-19," and developed a process to enable employers to submit these requests via a dedicated e-fax line. As of May 30, the IRS had received 7,789 Forms 7200, and processed 2,410 of them, with refunds totaling more than $50 million.
In response to the public health emergency, the IRS also closed its four tax processing centers. The majority of work at these facilities is performed onsite and is not conducive to remote work. As of May 20, the IRS estimates that 10.4 million pieces of mail were received while the facilities were closed. As of the week ending May 23, 2020, the IRS estimated that 10 million paper individual tax returns and 6.6 million paper business tax returns still needed to be processed. In addition to all that unopened mail, the IRS had more than 1.7 million tax returns in its error resolution inventory as of this same period. The IRS had 2.5 million cases in its accounts management inventory as of March 14, 2020, and had nearly 1.6 million returns in its fraud program inventories as of the week ending May 23, 2020.
When the IRS closed its offices across the country, it ceased operations on its toll-free telephone lines and closed its Taxpayer Assistance Centers. As of May 20, 48 of the 105 toll-free lines remained closed, and all of the TACs were still closed too. On top of that, 10,792 (98 percent) of the 11,014 Volunteer Income Tax Assistance/Tax Counseling for the Elderly partner sites remain closed as of May 24, 2020.