IRS has provided updated instructions to taxpayers with respect to the effects of coronavirus – COVID-19 on offers in compromise (OICs).
IRS has the authority to compromise a taxpayer’s tax liability. An OIC is an agreement between the taxpayer and IRS that compromises a taxpayer’s tax debt for less than the full amount owed. IRS will accept an OIC when it is unlikely that the tax liability can be collected in full and the amount offered by the taxpayer reasonably reflects the taxpayer’s collection potential. The goal of an OIC is to collect what is potentially collectible at the earliest possible time and at the least cost to the government.
IRS had previously announced the following OIC procedural changes in effect through July 15, 2020 due to the coronavirus – COVID-19 pandemic:
- Pending OICs: IRS will allow taxpayers until July 15, 2020 to provide any requested additional information to support a pending OIC. IRS will not close any pending OIC request before July 15, 2020 without the taxpayer’s consent.
- OIC payments: Taxpayers have the option of suspending all payments on accepted OICs and pending OICs until July 15, 2020, although interest will continue to accrue on any unpaid balances while an OIC is pending.
- Delinquent return filings: IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year 2018.
IRS has provided new guidance on OICs, in the form of FAQs.
Q. What about taxpayers trying to apply for an OIC?
A. Taxpayers may still submit an OIC if they can’t pay their full tax liability, or if doing so would create a financial hardship. Most taxpayers who can pay through a payment plan can set one up using the IRS online payment agreement application.
Note. While IRS is not currently receiving mail, IRS is working to reopen its offices and to restore mail service.
Also, if a taxpayer submits an offer, and it is returned by the US Postal Service, the taxpayer should keep a copy of that returned offer and resubmit it once IRS is once again able to process OIC applications.
Q. What about pending OIC applications?
A. IRS will allow taxpayers until July 15, 2020, to provide any additional information IRS requested to support a pending OIC. Also, IRS generally will not close, without the taxpayer’s consent, a pending OIC request before July 15, 2020, if the case is under IRS jurisdiction (i.e., the taxpayer is not in bankruptcy).
Q. What is the status of OIC payments?
A. If a taxpayer has a pending or accepted offer, IRS urges the taxpayer to continue making the required payments if possible, but temporary relief is available for those affected by Coronavirus COVID-19:
- If IRS has not already accepted a taxpayer’s offer, the taxpayer has the option of skipping payments between March 25 through July 15, 2020. The taxpayer should resume payments due after July 15, 2020. IRS will amend the taxpayer’s offer to allow him to pay the skipped payments at the end of the offer period, if the offer is accepted.
- If IRS has already accepted a taxpayer’s offer, and the taxpayer is unable to make the agreed payments of their accepted offer because of a Coronavirus COVID-19 hardship, the taxpayer may suspend making payments until July 15, 2020. However, this is ONLY a payment suspension, and the taxpayer will need to provide these missed payments when the suspension period ends. If the taxpayer is unable to make up the missed payments, the taxpayer can contact the number on the notice the IRS will send about the missed payments to discuss their individual needs.
Q. What should I do if my OIC is under consideration and I received a request for documents, payments, or unfiled tax returns prior to the end of the suspension period (July 15, 2020)?
A. Taxpayers who receive requests for information or tax returns prior to the end of the suspension period should,if able, provide the requested information to continue the OIC investigation. If the taxpayer is unable to provide the documents or returns, contact the IRS employee at the number provided on the correspondence, keeping in mind the employee may not be available immediately due to office closings and delays in mail deliveries.
IRS will update these Coronavirus FAQs as the situation changes.
Interested in back tax help, call us today at 1-877-788-2937.
Mike Habib is an IRS licensed Enrolled Agent who owns and operates a specialized tax representation boutique resolution firm serving individual and business taxpayers who want to effectuate their offer in compromise in various metro areas such as Los Angeles, Whittier, Pasadena, Glendale, Burbank, Orange County, Riverside, Palm Springs, San Bernardino, Palmdale, Bakersfield, New York, New Jersey, Chicago, Houston, Phoenix, Philadelphia, San Antonio, San Diego, Dallas, San Jose, Detroit, Jacksonville, Indianapolis, San Francisco, Columbus, Austin, Memphis, Fort Worth, Baltimore, Charlotte, El Paso, Boston, Seattle, Washington DC, Milwaukee, Denver, Louisville, Jefferson, Las Vegas, Reno, Hempstead, Tucson, Nashville, Davidson, Portland, Tucson, Albuquerque, Santa Fe, Anchorage, Atlanta, Long Beach, Fresno, Sacramento, Mesa, Kansas City, Cleveland, Virginia Beach, Omaha, Miami, Oakland, Tulsa, Honolulu, Minneapolis, Pittsburgh, Colorado Springs, Arlington, Wichita, Birmingham, Montgomery, Tampa, Orlando.
Local communities served:IRS and state offer in compomise help for clients throughout Southern California including Norwalk, Santa Fe Springs, Downey, Pico Rivera, Montebello, Hacienda Heights, La Habra Heights, West Covina, La Habra, Brea, Fullerton, Yorba Linda, Cerritos, La Mirada, Lakewood, Anaheim, Santa Ana, Long Beach, Compton, Torrance, Los Angeles, Pasadena, Beverly Hills, Santa Monica and throughout Los Angeles County, Newport Beach, Irvine, Orange County, Corona, San Bernardino County, Riverside County, the Inland Empire, the San Fernando Valley, Ventura county, and the San Gabriel Valley.