The IRS People First Initiative – A Unique Compliance Opportunity for Taxpayers through Collection Relief and Postponed Compliance Actions, by CORY STIGILE
The IRS unveiled a new “People First initiative” today in IR-2020-59 as part of a continued COVID-19 relief effort for taxpayers. While a primary feature of the announcement is a targeted and significant suspension of collection enforcement and other compliance functions, the People First Initiative provides a rare opportunity for non-filers and procrastinators to get into compliance. While the initiative leaves in an exception when warranted, this is a very significant relief provision.
Opportunities for Non-Filers
The benefits of the initiative are particularly unique because of the confluence of two events. First, the IRS is suspending lien and levy activity until July 15th. These are two of their primary enforcement tools to collect taxes. This permits of the filing delinquent returns together with an installment request or other collection alternative with a completely different dynamic of suspended enforced collection. Second, a significant part of the recent economic stimulus is being administered through the IRS so the filing of a 2019 return, or prior returns, may result in a refund, or at least an offset due to the relief provisions as summarized in our recent blog. As noted in the announcement, “[m]ore than 1 million households that haven’t filed tax returns during the last three years are actually owed refunds; they still have time to claim these refunds.”
Complex Collection Cases
For more complex ongoing collection cases, the People First Initiative also provides an extraordinary opportunity to re-approach collection solutions in a new environment. As we noted in our blog last week, the financial statements reported to the IRS in recent months have substantially changed. Often taxpayers working with the IRS Collection Division or Collection Appeals are in the process of selling a home or a business, or perhaps securing a loan. Many of these transactions have stopped entirely, if any businesses are even still operating under cessation orders issued by various states. Taxpayers can now work through these realities with a suspended levy and lien framework.
For taxpayers struggling to meet installment obligations that were agreed to before their new post-COVID-9 reality, the announcement permits Taxpayers who are currently unable to comply to suspend payments until July 15th. The IRS will not default Installment Agreements during this period, although interest will continue to accrue on unpaid balances.
For taxpayers with pending offers in compromise, the IRS extended information request due dates until July 15th, and will not close pending requests without taxpayer consent. Additionally, Offer In Compromise payments on accepted offers may be suspended until July 15, 2020. This can be particularly relevant for taxpayers who made deferred payment offers over a two year period. Finally, while delinquent return filings can default an offer in compromise, the announcement provides that the IRS will not default offers for taxpayers delinquent on their 2018 return filings, provided their 2018 and 2019 returns are filed before July 15, 2020.
A key component to any collection case is current compliance, as taxpayers need to be current on return filing and estimated payment obligations in order to qualify for alternatives such as offers in compromise or installment agreements. The Treasury’s recent extension of filing and estimated tax payment deadlines until July 15, 2020, combined with the suspension of liens and levies, provides a unique opportunity to be eligible for collection alternatives to pay some or all of their tax liabilities over time while potentially also qualifying for significant tax stimulus benefits.
IRS Examination Functions
Under the People First Initiative, the IRS will generally not start new examinations, although the IRS will make an exception if the statute of limitations may expire in the near future. Moreover, if your client recently received a statute of limitation request in an ongoing audit, be aware that a decision to the not extend the statute of limitations will often result in the issuance of a Notice of Deficiency. The United States Tax Court has announced that the statutory deadlines for filing a Petition to the Tax Court for a Notice of Deficiency (typically 90 days) are still in place and timely filing of a Tax Court Petition must be proven by the taxpayer. Use verified mail. Please note that the United States Tax Court building remains closed and trial sessions through June 30, 2020 are canceled.
Revenue Agents continue to work their existing examinations remotely, where possible, although in person meetings will be suspended. Taxpayers’ representatives should continue to review and attempt to respond to document requests but should communicate any difficulties to the Revenue Agents, or their managers if necessary.
While the IRS quickly initiated this People First Initiative today, and FAQs regarding the 2019 filing and payment deadline extensions yesterday, the announcement notes that the People First Initiative may be modified or expanded based on circumstances going forward.
CORY STIGILE – For more information please contact Cory Stigile – firstname.lastname@example.org 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