IRS is Helping Taxpayers with Tax Debt

Jan 15, 2021 | MMNT Blog

Due to Covid-19, IRS has decided to help taxpayers that have an outstanding tax liability.

Some of the highlights of the debt relief initiative are as follows:

  • Taxpayers who qualify for a short-term payment plan option may now have up to 180 days to resolve their tax liabilities instead of the usual 120 days.
  • The IRS will offer more flexibility for taxpayers who are temporarily unable to meet the payment terms of an accepted offer in compromise.
  • The IRS will automatically add certain new tax balances to existing installment agreements for individuals and for business taxpayers who have gone out of business. This will occur instead of having taxpayers’ default on their agreements.
  • Qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement or substantiation if their monthly payment proposal is sufficient.
  • Individual taxpayers who only owe for the 2019 tax year and who owe less than $250,000 may qualify to set up an Installment Agreement without notice of federal tax lien filed by the IRS.
  • 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.
  • Taxpayers who are financially impacted by the pandemic and cannot make payments are encouraged to contact the IRS for a temporary halt in collections efforts.

Reasonable cause and first-time abatement

The Initiative also provides relief for reasonable cause for taxpayers with failure-to-file, failure-to-pay, and failure-to-deposit penalties.

Additionally, the IRS has long since offered what they call the “first-time abatement”.  Under this provision, taxpayers may qualify for abatement of penalties for filing tax returns late and/or penalties for paying taxes late.  To qualify for this abatement: taxpayers cannot have any prior penalties for the past three years; must be current on all tax liabilities; and must have timely filed all required tax filings for the past three years.

If you have received a notice from the IRS assessing a penalty, and you believe you qualify for this special relief, please contact your tax professional.

This blog could become outdated due to tax law updates.

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