Due to the ongoing COVID-19 Pandemic, the IRS has provided relief to taxpayers by extending filing and other deadlines. Now, in an internal memorandum from Fred Schindler the Director of Headquarters Collection (SBSE), the IRS continues to provide relief to taxpayers with tax debt by suspending most tax collection activities. These changes mirror the previous relief provided by the IRS, and restates the relief contained in the People First Initiative. Our tax litigation attorneys are advising our clients that they can expect enforced tax collection activities to be suspended unless there is an exigent circumstance including the loss of the opportunity for the government to collect taxes due. The expiration of the statute of limitations is one example.
The importance of the memo is that while it mostly repeats and fleshes out the People First Initiative, it is a direct “order” from the head of SBSE Collection to all Collection Executives. The People First Initiative is a bit more nebulous in terms of its actual impact on the activities of rank and file employees. The collection activities outlined in the memo include most activities related to the collection process such as meeting with taxpayers, filing new Notices of Federal Tax Liens (NFTL), issuing levies, taking or scheduling seizures actions, and pursuing civil suit proceedings. Automated tax levy programs are also suspended. The memorandum also directs Collections not to default installment agreements for missed payments due between April 1 and July 15, 2020 (the suspension period). Due to the ongoing and ever changing nature of the COVID-19 epidemic in the United States, the IRS may extend the suspension period and the incorporated relief provisions further.
It is important for taxpayers and their advisors to remember that even though collection enforcement activity will be rare from now through July 15th, once the suspension period ends the IRS may begin filing liens and levies with a vengeance. Our tax lawyers are therefore recommending to our clients that, to the extent practicable, they position themselves to take appropriate action to forestall collection after the suspension period ends. This includes submitting offers in compromise, and requesting installment agreements now.
Payments on Direct Debit Agreements will continue to be deducted, and IRS employees can only suspend certain single payments after following the procedures of the Internal Revenue Manual (IRM). If taxpayers wish to suspend direct debits during the entire suspension period, they should contact their bank directly.
Taxpayers have until July 15, 2020 to provide additional requested information to support a pending OIC, and the IRS will not close any pending OIC request before July 15, 2020 without the consent of the taxpayer. As with installment agreement payments, taxpayers can choose to suspend OIC payments until the end of the suspension period. Taxpayers should note that interest on unpaid balances will continue to accrue while an OIC is pending, but this is only relevant if the offer is not ultimately accepted, or it later defaults. Finally, this memorandum also restates that the IRS will suspend NEW passport certification requests to the Department of State.
Despite the suspension of most ENFORCED collection, the IRS is not suspending all collection activity. Field Collection, i.e. Revenue Officers, activities will continue with the IRS contacting taxpayers remotely to collect documentation. If Taxpayers do not provide documentation, there will be no enforcement unless there is an exigent circumstance such as the expiration of a statute of limitations. The IRS will continue to assign and work cases in the High-Income Non-filer program; however, summonses to taxpayers or third parties will only be issued if there are exigent circumstances.
Many case actions such as establishing new installment agreements, determining currently not collectible statues, requesting credit reports, and request state wage and unemployment compensation records will continue. With new installment agreements and currently not collectible status cases where an NFTL is required, Collections is directed not to file the NFTL until after July 15, 2020. Campus (generally ACS) collection actions will continue for activities that are approved by the taxpayer or do not require taxpayer or third-party contact. The memorandum requires IRS employees to take into account the personal situation of the taxpayer when making contact with the taxpayer. Additionally, IRS employees are directed to consider the stress and fatigue caused by the epidemic even in situations where a taxpayer has not been medically or financially affected by COVID-19.
The IRS will continue to take steps to follow court-imposed deadlines for filing, amending proofs of claim, and objecting to plans and discharge for bankruptcy. However, they are suspending all discretionary activities such as levying exempt property, defaulting plans, and filing NFTL’s on dismissed claims. In probate cases IRS employees may file proof of claims for taxes as it protects the governments and also may issue Form 10492, Notice of Federal Taxes due, since this form reflect only the balance due and does not demand payment. Additionally, IRS employees may follow up on filed proofs of claim. IRS employees working on probate cases should not be requesting new NFTL’s unless exigent circumstances exist.