IRS Announces COVID-19 Tax Relief Initiative to Help Taxpayers
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On November 2, 2020, the IRS announced several changes to its collection procedures to assist struggling taxpayers impacted by COVID-19. These changes include:
- Taxpayers who qualify for a short-term payment plan option may now have up to 180 days to resolve their tax liabilities instead of 120 days.
- Flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
- Automatic add of certain new tax balances to existing Installment Agreements, for individual and out-of-business taxpayers. This would be in lieu of defaulting the agreement, which can complicate matters for those trying to pay their taxes.
- Reduction of burden to certain qualified individual taxpayers who owe less than $250,000 by allowing for Installment Agreements without providing a financial statement or substantiation if their monthly payment proposal is sufficient.
- Qualifying some individual taxpayers who only owe for the 2019 tax year and who owe less than $250,000 to set up an Installment Agreement without a notice of federal tax lien filed by the IRS. Additionally, qualified taxpayers with existing Direct Debit Installment Agreements may now be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.
- Temporary delay of collection for taxpayers who can show inability to pay until financial condition improves.
Qualified taxpayers consist of (1) individuals who owe $50,000 or less in combined income tax, penalties and interest or (2) businesses that owe $25,000 or less combined that have filed all tax returns.
Notably, in this announcement, the IRS is “highlighting” its “reasonable cause assistance.” “Reasonable cause” is the showing that a taxpayer needs to make for the IRS to waive certain penalties, including failures to file and failure to furnish. Although the IRS did not elaborate, the IRS may be signaling an ease in its standard to establish “reasonable cause,” particularly in light of the impact of COVID-19 pandemic on taxpayers. This could be good news for employers who must establish “reasonable cause” for any failure to file or furnish IRS Forms 1094-C/1095-C.
IRS Small Business/Self-Employer Deputy IRS Commissioner Darren Guillot explains the new relief options. See: IRS Offers New Relief Options to Help Taxpayers Affected by COVID-19
To learn more about ACA compliance in 2020, click here.
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