When the COVID-19 pandemic hit the United States in full swing early this year, the government reacted with legislation and policy to ease the impact on the American public. This included an extension of tax filing and payment obligations until July 15, 2020. It also allowed taxpayers that were in installment agreement payment plans with the IRS to stop making payments between March 25 and July 15 without risking that the agreements would be defaulted. However, as July 15th is next week, it is soon time to start making payments again.
In IRS News Release 2020-142 (issued July 8, 2020), the IRS advised taxpayers when they need to start making payments again. If you were in an installment agreement and were manually making payments by mail or online, you will have to begin doing so again beginning with your first payment due date after July 15. That means that if your payment was previously due on the 28th of each month, you will have to resume making payments by July 28th. For those whose payments are due on the 15th of each month, you will have until August 15th to start making your payments again.
If you were making payments by direct debit from your bank account, those payments continued during the March 25 – July 15 time frame unless you asked your bank to suspend making the payments. If you did so, you should contact your bank to request that the direct debit payments be resumed.
Those that do not resume making payments will face a default of their installment agreement. When an installment agreement is defaulted, a taxpayer risks collection action and will have to start from the beginning to work out a new payment plan. Depending on the size of the liability, this could mean the preparation of financial statements to establish a new payment plan which may not be for the same monthly payment amount as the prior agreement. Therefore, if you can afford to begin making payments again under your existing plan, you should do so to avoid a default.
But what if you cannot afford the payments that you had been making? In such a case, it is best to engage the IRS in discussion. You may be able to negotiate a lower monthly payment due to your current financial circumstances. It may be that your income (business income or wages) has taken such a hit that an Offer in Compromise to resolve the tax balance for less than the total may now be appropriate. You may also be eligible for Currently Non-Collectible status to allow you some additional time to get back on your feet. Other options may also exist. Of course, because the IRS offices are not yet back in full operation, it may be difficult to actually speak to someone. However, if you do not work with the government, you or your business may face forced collection action such as liens or levies.
Rob Teuber is a tax attorney with the law firm von Briesen & Roper s.c. He works with individual and business clients across the U.S. to resolve their Federal tax issues. He also works with Wisconsin taxpayers to resolve issues with the Wisconsin Department of Revenue from his offices in Milwaukee and Waukesha, Wisconsin.