IRS Taxpayer Relief Initiative Offers New Payment Options
The COVID-19 pandemic has created challenging circumstances for many businesses across New Jersey. The combination of government orders, fear of virus transmission, and reopening guidelines have businesses looking for new paths to profitability under unexpected conditions. According to the New Jersey Economic Forecast, published by Rutgers Economic Advisory Service, 16.7% of the state’s total jobs were lost between February and May 2020. This astonishing number reflects how deeply the economy has been impacted and how long it will take to recover. It also demonstrates the immense financial challenges many faced when deciding how to survive and position for the future. In assessing various expenses, difficult decisions had to be made about cost savings. The last thing many considered were taxes, leaving some with unpaid tax liabilities along with penalties and interest.
The good news is that the IRS recently announced the Taxpayer Relief Initiative, which offers new payment options, first-time penalty abatements, extended payment timelines, and more. We have provided a summary of the key details below.
- First Time Penalty Abatement – For qualifying business taxpayers, administrative relief for failing to file a tax return, make timely payments or deposit taxes is available. To qualify, the taxpayer must not have been required to previously file a return or has no penalties for the three tax years before the tax year in which a penalty was assessed. All the necessary returns must have been filed (or properly extended) and any taxes due must have been paid or arranged to be paid.
- Collection Process Delay – A temporary collection process delay can be made if the IRS determines a taxpayer cannot pay any of the outstanding tax debt. Under these circumstances, the IRS may report the account as not collectible and delay collection until financial conditions improve. It is important to note this does not mean the debt is eliminated, but instead, the IRS has determined it cannot be paid at this time. The IRS may require the taxpayer to complete a Collection Information Sheet which requires documentation of a taxpayer’s financial situation. Finally, the delay in debt collection does not mean that penalties and interest stop accruing. This does not happen until the outstanding balance is paid in full.
- Expanded Installment Agreements – This option is available for taxpayers that cannot pay the balance due immediately but can over time. The expanded agreement options remove the requirements for financial statements and other substantiation in more circumstances and for balances up to $250,000. The agreements have also been modified to further limit requirements for Federal Tax Lien determinations for those who only owe for 2019.
- Short Term Payment Plans – There has also been a change to the rules governing short term payment plans. The program is available to businesses that owe $25,000 or less and that have filed all tax returns. These plans are now able to be extended from 120 days to 180 days.
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The Taxpayer Relief Initiative is welcome news for business taxpayers that have been hard hit by the COVID-19 pandemic. Through the various changes, businesses now have new opportunities to resolve tax liabilities, interest, and penalties not previously available. If you have questions about the information outlined above or need assistance with another tax-related issue, Klatzkin can help. For additional information, click here to contact us. We look forward to speaking with you soon.
©2020 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and should not be construed as accounting, tax, or financial advice. Please consult your tax advisor concerning your specific situation.