In my 2021 Annual Report back to Congress, I reported on the IRS’s processing backlogs and beneficial that the IRS droop all automated assortment notices till it’s present on processing authentic and amended returns and unprocessed correspondence. I additionally described the IRS’s assortment insurance policies and beneficial that the IRS postpone the issuance of Notices of Intent to Levy and the submitting of Notices of Federal Tax Lien till it has eradicated its backlog of unprocessed mail and responded to taxpayers’ correspondence.
On February 5, 2022, the IRS introduced that it suspended the automated mailing of greater than a dozen letters, together with automated assortment notices usually issued when a taxpayer owes federal tax or automated notices asking a taxpayer to file a tax return when the IRS has no document of the submitting of the return. This discover suspension is nice information for taxpayers and may get rid of some confusion and frustration for these experiencing processing delays.
Notice: Taxpayers that owe tax, curiosity, or penalties ought to NOT interpret this announcement as suspending the requirement to make cost or suspending the time to make cost. If relevant, curiosity and penalties proceed to accrue till cost is made. Taxpayers can view their present stability by establishing and accessing their on-line account.
Normally, taxpayers who haven’t been issued automated discover CP504, Discover of Intent to Seize (Levy) Your Property or Rights to Property, previous to February 9, 2022, won’t be issued any automated assortment notices or be topic to IRS assortment whereas the suspension stays in impact. Taxpayers who’ve been issued a CP504 won’t be issued any automated assortment notices however could also be topic to case-specific assortment actions by the IRS.
Some Taxpayers Could Nonetheless Obtain a Discover of Federal Tax Lien or a Discover of Intent to Levy, Could Nonetheless Have Sure Property Levied, and Could Have Their Overpayments Offset
If the taxpayer’s account has been assigned to the IRS’s Automated Assortment System (ACS), the IRS won’t difficulty automated Letter 11 – Ultimate Discover – Discover of Intent to Levy and Your Discover of a Proper to a Listening to. Letter 11 is issued by ACS, a computerized stock that manually and systemically sends notices to taxpayers, points Notices of Federal Tax Lien and levies on taxpayer property, and solutions calls to resolve stability due accounts. ACS can even not systemically difficulty Notices of Federal Tax Lien.
If a taxpayer’s account has been assigned to one of many IRS’s automated levy packages (ALPs), the IRS can also be suspending the levies made by these packages and the automated notices which are equal to Letter 11. The ALPs systemically difficulty levies on state earnings tax refunds, municipal earnings tax refunds, Alaska Everlasting Fund dividend funds, and federal funds, together with sure Social Safety advantages, owed to taxpayers.
Letter 11 and equal notices fulfill the statutory necessities that the IRS notify the taxpayer of its intent to levy and of the taxpayer’s proper to a Assortment Due Course of (CDP) listening to. These notices advise taxpayers that the IRS could file a Discover of Federal Tax Lien if it hasn’t already completed so. The letter additionally explains that the IRS could certify to the State Division that the taxpayer owes a significantly delinquent tax debt if the debt (together with penalties and curiosity) is greater than the present threshold of $55,000, which can end result within the State Division revoking a taxpayer’s passport, refusing to difficulty or renew a passport, or permitting a taxpayer who’s already overseas to make use of the passport solely to return on to the USA. Until the IRS points Letter 11 or an equal letter that advises taxpayers of the suitable to request a Assortment Due Course of listening to, the IRS usually could not proceed with levying on a taxpayer’s property.
As a result of the Letter 11 triggers the suitable to request a Assortment Due Course of listening to, taxpayers mustn’t forego that proper, the place applicable.
Though the IRS has suspended automated notices for unpaid taxes assigned to ACS and ALPs, it’ll proceed with case-specific enforcement work. Due to this fact, relying upon the circumstances, a person IRS worker could difficulty a letter equal to Letter 11, notifying the taxpayer of its intent to levy and of the taxpayer’s proper to a CDP listening to, difficulty a levy, or file a Discover of Federal Tax Lien.
Taxpayers must be conscious that the IRS isn’t interrupting its common procedures for offsetting tax refunds to gather excellent liabilities.
Additionally, pursuant to IRC § 6402(a), the IRS could offset a taxpayer’s overpayment, together with refundable credit, and apply it to a federal tax legal responsibility, however it’s not required to take action. Nonetheless, the IRS should offset an overpayment in opposition to a non-tax federal debt comparable to youngster help or state tax legal responsibility owed by the taxpayer (see IRC § 6402(c)-(f)).
In search of Aid From Levies and Refund Offsets
IRC § 6343(a)(1)(D) requires the IRS to launch a levy when it will create an financial hardship as a result of monetary situation of the taxpayer. Help in requesting a launch of levy could also be obtainable from TAS or Low Revenue Taxpayer Clinics.
Within the space of overpayment and refund offsets, as I mentioned in an earlier weblog, the IRS has agreed to train its discretion underneath IRC § 6402(a) for some gives in compromise (OICs). Starting with OICs accepted on or after November 1, 2021, the IRS won’t offset overpayments or refunds in opposition to tax intervals included within the OIC after the provide acceptance date. For instance, the taxpayer has an OIC accepted on November 15, 2021, and recordsdata a 2021 tax return on April 15, 2022, displaying a refund. The IRS won’t offset that overpayment and can refund the overpayment to the taxpayer if there are not any different money owed prohibiting the refund. As well as, the IRS has additionally determined that refunds attributed to the 2021 Restoration Rebate Credit score won’t be offset to a federal earnings tax legal responsibility.
The IRS has additionally been elevating consciousness of the procedures for an offset bypass refund (OBR) if a taxpayer is experiencing a monetary hardship. Usually, an OBR is just obtainable earlier than the IRS applies a present overpayment to a previous tax legal responsibility and the place the taxpayer establishes financial hardship (for instance, the person must pay a utility invoice to keep away from disconnection). As soon as the taxpayer establishes the quantity of the hardship, the IRS will solely bypass sufficient of the overpayment to alleviate the hardship. For instance, if a taxpayer has an overpayment of $4,000 and excellent tax liabilities of greater than the $4,000, however establishes a hardship of $1,000, the IRS could difficulty a $1,000 refund to the taxpayer and offset the stability, $3,000, to the tax legal responsibility. Underneath the brand new steering mentioned above, the IRS will enable qualifying taxpayers experiencing monetary hardship to hunt OBRs whereas their OICs are pending the IRS’s consideration. Taxpayers can name the IRS to request an OBR, however the IRS could not reply their name. Help could also be obtainable from TAS, nonetheless.
Assortment Choices Are Out there
Taxpayers unable to pay their legal responsibility in full directly could have a number of choices. Those that are present on their tax filings can request a cost plan (installment settlement) to pay the remaining legal responsibility over time. Taxpayers owing lower than $100,000 could possibly use the on-line cost settlement device to pay the legal responsibility in 180 days or much less. Taxpayers owing lower than $50,000 may additionally be capable of arrange a long-term cost plan (paying month-to-month with an installment settlement) utilizing that very same self-service on-line useful resource. Calling the quantity on the discover or letter can also be an choice, as is mailing in an installment settlement request. Nonetheless, lengthy maintain occasions and correspondence backlogs could take a look at the persistence of these utilizing these two choices. An OIC would be the applicable strategy to resolve a legal responsibility if the taxpayer is unable to pay the legal responsibility in full or by means of installments. This selection permits taxpayers and the IRS to settle a tax legal responsibility for lower than the total quantity due. The IRS could settle for an OIC if the IRS agrees that there’s doubt as to legal responsibility, doubt as to collectability, or for functions of efficient tax administration.
Taxpayers unable to pay their legal responsibility right now could request that the IRS delay assortment and report the account as presently not collectible. This selection could present a short lived reprieve to taxpayers who can’t pay any of the quantity due as a result of these funds would stop them from assembly primary residing bills. There isn’t any on-line technique to request this assortment various. A caveat about this assortment various: taxpayers should name the IRS and ought to be ready to explain their monetary standing when calling the IRS to request this reduction, the IRS will nonetheless cost relevant penalties and curiosity till the legal responsibility is paid or expires, and the IRS could file a Discover of Federal Tax Lien.
Taxpayers could name the IRS to debate these choices, however the probability of reaching an IRS worker on the cellphone stays low. As I reported, in the course of the 2021 submitting season, taxpayers linked with the IRS solely 9 % of the time. Nonetheless, the probabilities of getting by means of to an ACS worker are larger than calling the toll-free customer support line. As well as, as a result of the IRS is suspending automated notices, there ought to be fewer calls to ACS, which can enhance the probabilities of getting by means of to an ACS worker.
Even Although the IRS Suspended Sure Assortment Notices, It Did Not Droop Liabilities
We commend the IRS for suspending automated assortment notices usually issued when a taxpayer owes extra tax and when the IRS has no document of a taxpayer submitting a tax return. This can be a large reduction for hundreds of thousands of taxpayers who could have acquired these notices whereas nonetheless ready for the IRS to course of their returns or handle correspondence. Do not forget that curiosity and penalties will proceed to mount, even when the IRS isn’t sending subsequent notices reminding taxpayers of their balances.
