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IRS Complex Collection – National Tax Relief for Coronavirus / Current Compliance By CORY STIGILE

Treasury Secretary Steven Mnuchin stated Tuesday that federal taxpayers would be provided with an additional 90 day period to pay federal taxes, although returns currently still need to be timely filed.  Last Friday, California also provided relief by extending the date for tax return filing and payment for 60 days for individual returns and 90 days for partnership and LLC returns (they were due this week) until June 30, 2020.

As background and for historical context, California Wildfire Victims in 2019 were eligible for relief from various filing/payment deadlines that fell between November 2018 and April 30, 2019.  Thus, they had additional months to pay individual, corporate, S-Corporation, partnership, and estate and trust tax returns and payments.  Relief also included payroll tax and income tax estimated payments.

Once the President declares a major disaster to be present, the Treasury/IRS is permitted to postpone certain deadlines.  Specifically, under IRC Section 7508A, in the case of a taxpayer determined by the Secretary to be affected by a federally declared disaster, the Secretary may specify a period of up to 1 year that may be disregarded in determining, under the internal revenue laws, in respect of any tax liability of such taxpayer, whether the taxpayer timely filed any return or paid any tax, or filed a timely Tax Court petition, among other acts.  The specifics of relief for this filing season are still being issued, but a clear signal has been by provided by both federal and state governments that relief is appropriate.

IRS Collection Consequences

As the scope of relief becomes clarified, taxpayers currently addressing IRS administrative collection actions will need to continue to review their current compliance obligations.  Relief in this critical time may provide an opportunity to “catch up” and make timely (with the extension) filings and tax payments.  The failure to be currently compliant removes eligibility for many taxpayers for Installment Agreements or Offers in Compromise, so this imminent relief may provide opportunities when taxpayers may not have other otherwise achieved compliance.

While our country works together to get through this crisis, the prompt relief may permit some taxpayers to worry about one less thing.  It is unclear whether the IRS will issue a type of Collection Moratorium, which it often does during December to permit some relief during the holidays.  In any event, the facts and circumstances of the world and the financial condition of taxpayers may be drastically different than they were last month.  Any Form 433-A (the IRS financial statement) that was prepared in recent months probably just became irrelevant.

I contacted the IRS Practitioner Hotline when writing this blog and noted that the anticipated wait time was only two minutes.  As you review each client’s situation, consider whether the temporary relief provides an opportunity for your client to get compliant.  Please note that the IRS call centers can be used in unexpected ways to help around the country as we respond to natural disasters, but there was no wait his morning.  As noted above though, they appear to currently be open for business.  This week, a Revenue Officer faxed a payment confirmation, so we knew that the IRS received and processed the payment in a timely manner.

We are still waiting to see the scope of other tax relief as the Senate mulls the House’s Coronavirus Response Act.  In the interim, consider the administrative relief noted above and see how you can immediately provide financial relief for your clients.

CORY STIGILE – For more information please contact Cory Stigile – stigile@taxlitigator.com  Mr. Stigile is a principal at Hochman Salkin Toscher Perez P.C., a CPA licensed in California, the past-President of the Los Angeles Chapter of CalCPA and a Certified Specialist in Taxation Law by The State Bar of California, Board of Legal Specialization. Mr. Stigile specializes in tax controversies as well as tax, business, and international tax. His representation includes Federal and state controversy matters and tax litigation, including sensitive tax-related examinations and investigations for individuals, business enterprises, partnerships, limited liability companies, and corporations. His practice also includes complex civil tax examinations. Additional information is available at www.taxlitigator.com

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