The IRS is offering some tax breaks during the pandemic.
Updated: 1:55 p.m. ET Apr. 29, 2020
Because the tax filing deadline is postponed for three months, filers also have until July 15 to make 2019 retirement contributions to a traditional IRA, Roth IRA, or SEP-IRA – leaving more time to correct an error. For more information on IRA contributions in the wake of COVID-19, go here.
You’ve probably heard that tax day is now on July 15. What you probably haven’t heard is which payments you can suspend, or that the government won’t automatically close your offer for a deal.
The IRS is calling it the People First Initiative, and it starts on April 1. Here’s how it works and what it offers.
If you’re already under an installment agreement, in which you pay taxes off month by month over a certain amount of time, your payments are suspended from April 1 to July 15. No existing installment agreements will default.
If you can’t meet the installment agreement terms, you can suspend payments for this time period, too. However, interest will still rise on unpaid balances.
Offers in Compromise
Offers in compromise (OIC), or when someone negotiates with the IRS to pay off debt for an amount that is less than what’s owed, also don’t need to be paid until July 15. But like installment agreements, interest will continue to rise.
Taxpayers also have until July 15 to provide the requested information for a pending OIC. The IRS won’t close any pending OIC request before that date without the taxpayer’s consent.
The IRS also won’t default an OIC for taxpayers who didn’t file their tax return for 2018.
You don’t have to worry about the government coming after your property – until July 15, at least.
Any property under liens and levies, including seizures of a residence, have been suspended. Automatic liens and levies will be put on halt as well, and the government won’t forward cases to private collection agencies.
But people who don’t pay aren’t completely off the hook. Officers “will continue to pursue high-income non-filers and perform other similar activities where warranted,” the IRS warns.
If your statute of limitations, or the period that the IRS can try to collect the debt, isn’t expected to end in 2020, the IRS is “unlikely” to pursue you until after July 15. However, if the period ends in 2020, the government will continue trying to collect the debt.
Audits and appeals
Until July 15, the IRS likely won’t start new audits unless deemed necessary for unique situations. Appeals cases will continue. All in-person audits and appeals meetings have been suspended but will continue through telephone or videoconference.
Earned income tax credit
Taxpayers have until July 15 to tell the IRS that they qualify for Earned Income Tax Credit, which reduces the amount of tax that low-income people owe and may give them a tax refund.
Although few people are traveling during the pandemic, the IRS will not file any certifications – which prevents taxpayers from receiving or renewing passports – to the Department of State for “seriously delinquent” taxpayers.
Published by Debt.com, LLC