On July 15, 2020, taxpayers will be faced with the trifecta of the due dates for their federal tax reporting and payment obligations for 2019 and the first and second quarters of 2020. In response to the COVID-19 crisis, the IRS provided tax relief in the form of an extension of federal tax filing and payment obligations. More specifically, the due dates for 2019 federal tax returns and payments that were due on April 15, 2020, were extended to July 15, 2020. The IRS also extended to July 15, 2020, the quarterly estimates for the first and second quarters of 2020 that were due on April 15, 2020, and June 15, 2020, respectively. Taxpayers welcomed the IRS’ grant of tax relief. The party will end on July 15, 2020, when the obligations will become due. Taxpayers will need to be ready to meet their 2019 and 2020 federal tax payment obligations due as of July 15, 2020. If not, taxpayers will risk exposure to IRS forced collection actions including levies and lien filings. Fortunately, taxpayers can negotiate collection alternatives with the IRS to satisfy their federal tax liabilities.
The relief provided by the IRS is only a deferral of federal tax obligations. The relief does not include cancellation of any tax liabilities. During most of the 1st quarter of 2020, taxpayers might not have planned for a sudden and massive shut down of the economy. However, the economy shuddered to an almost complete halt during the end of the 1st quarter. Stay-at-home orders caused many businesses to close and many people to become unemployed. Nonetheless, taxpayers’ reporting and payment obligations did not abate. Rather, they were pushed off and deferred to the future – to July 15, 2020.
In response to the COVID-19 crisis, the IRS suspended forced collection activity until July 15, 2020. More specifically, the IRS will not levy taxpayers for their failures to meet their federal tax payment obligations on or before July 15, 2020. For example, taxpayers who have installment agreement obligations can suspend their payments until July 15, 2020, without the repercussions of a defaulted installment agreement. The IRS will not impose levies on those taxpayers on or before July 15, 2020. Ordinarily, skipping an installment payment would cause the installment agreement to default. The defaulted installment agreement would trigger the IRS to take forced collection action against the defaulting taxpayer.
Taxpayers may find themselves unable to meet their federal tax payment obligations that will become due as July 15, 2020. They could find themselves in the IRS’ collection system. The IRS will issue notices to these taxpayers demanding payment for their outstanding federal tax liabilities. This does not have to be cause for panic or stress. IRS collection procedures provide a path for Taxpayers to negotiate their tax obligations with the IRS. For example, taxpayers can negotiate offers in compromise and/or installment agreement payment plans to resolve their tax liability matters with the IRS. However, navigating the maze of IRS collection procedures can be daunting. Timely responding to IRS notices and correctly navigating that maze is critical to avoid being on the receiving end of an IRS lien or levy.
For more information on negotiating your federal tax liabilities and how to navigate IRS tax collection procedures, please contact me. I am a former IRS Counsel attorney and can help you navigate your way to the best possible collection alternative outcome.