COVID-19 Tax Debt Relief: IRS Expands Options for Back Taxes

November 3, 2020

If you’re struggling with IRS tax debt payments, we have good news! The IRS just announced new COVID-19 tax debt relief options designed to help taxpayers resolve their back taxes.

The updates to IRS collection processes will affect short-term payment plans, Installment Agreements, existing Offers in Compromise, and more.

“It’s important for taxpayers experiencing COVID-19-related financial difficulties to know about these available options and how to get the help they need,” says the IRS on its website. “Here’s the bottom line: If you’re struggling with your tax bill, reach out to us.”

Senior tax attorney Michael Raff discusses the IRS’s new announcement regarding tax debt repayment options

Financial Hardship Options for Tax Debt Relief

The IRS is highlighting its financial hardship options as part of the COVID-19 tax debt relief program. These options—including applying for Currently Non Collectible status or paying less than you owe through an Offer in Compromise—are not new. However, you may now qualify based on financial hardship caused by COVID-19.

The IRS is also offering penalty abatement for some qualifying taxpayers.

Extended Timeframes for Short-Term Payment Plans

Certain taxpayers who qualify for a short-term IRS debt payment plan can now get 180 days (6 months) to pay instead of 120 days (4 months). To qualify for a short-term payment plan with the IRS, you must be able to fully pay off your debt, interest, and penalties within the specified timeframe.

More Options to Pay Tax Debt Through Installment Agreements

Installment Agreements allow you to repay your tax debt to the IRS over time, often years. There are several types of Installment Agreements available. The IRS is now allowing more people to enter agreements with minimal red tape.

Installment Agreements can be time-based or finance-based. Time-based plans do not require financial statements and substantiation of your expenses in order to be approved, while some finance-based plans do.

As part of its COVID-19 tax debt relief initiative, the IRS has declared that taxpayers with debts up to $250,000 may be eligible for a time-based installment agreement, provided their proposed monthly payment is sufficient. Previously, debts had to be less than $50,000 to use this option.

What type of installment agreement should you apply for? It depends on a number of factors in your unique situation. Our experienced tax debt attorneys can help you navigate the options and secure the back tax repayment plan that’s best for you.

A time-based IRS installment agreement simply divides your debt by a set number of months (typically ranging from 60 to 84 months), depending on the program selection. For example, say you have back taxes resulting in $200,000 of IRS debt. With a time-based payment plan, you may be able to pay $2,300 per month (calculated as $200,000/84 months) until your liability is satisfied in full.

Can’t afford that amount? Finance-based tax debt agreements offer more options based on your income, assets, and expenses.

Flexibility for Existing Tax Debt Repayment Plans

The IRS is also extending more flexibility to taxpayers who already have an Offer in Compromise or Installment Agreement.

The IRS said in a newsletter that it will offer “flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.” If you’re having trouble making the payments for your existing OIC, give us a call to discuss your options.

If you have an existing Installment Agreement, you’ll have a little more wiggle room as part of the IRS COVID-19 tax debt relief options. Let’s say you entered an Installment Agreement in 2017. Then, for tax year 2019, you owed tax and failed to pay by the April 15 deadline. Normally, accruing this additional balance would default your Installment Agreement. Now, the balance can be tacked on to your existing agreement instead.

Understand Your Options with the Help of a Tax Debt Attorney

You don’t need to face the IRS alone. Our experienced tax debt attorneys will cut through the IRS jargon and guide you through the many options available for resolving your back taxes.

We work closely with you every step of the way. Your dedicated attorney is just a phone call or an email away throughout the process, and no question is too big or too small! Contact us today to schedule your 100% confidential consultation and begin your journey to tax debt relief.

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