What Is the IRS Taxpayer Relief Initiative?

Millions of American taxpayers have tax-related debt. The IRS has introduced a new initiative to help these debtors find relief in the wake of COVID-19.

Key takeaways

• Millions of Americans still owe billions in tax debt to the IRS
• The Taxpayer Relief Initiative expands allowances and assistance to many taxpayers
• More Americans may be eligible for an offer in compromise or installment agreement
• Taxpayers may be able to benefit from collections delays, lower tax bills, and relief from penalties

Many American taxpayers are still struggling with the effects of the COVID-19 pandemic. Existing debt or financial troubles have worsened during the economic recession, and many individuals have difficulty managing what they owe. 

Over the last year, the IRS has delayed tax filing deadlines and other requirements. And there have also been delayed refunds and other challenges faced by the agency itself.

Over 11 million American taxpayers owe money to the IRS, whether in back taxes, penalties, or interest, and they owe an estimated $125 billion in tax-related debt. As the pandemic has caused record unemployment, business closures, and layoffs, many taxpayers are challenged to make ends meet, much less cover their tax debt bill.

The government is seeking to provide assistance with the recent Taxpayer Relief Initiative. Here’s what you need to know about this program and how it helps many taxpayers get through the recession.

What is the Taxpayer Relief Initiative?

In March 2020, the IRS introduced the People First Initiative, which provided relief to American taxpayers facing financial hardships. This program offered temporary relief, such as suspended payments and postponed debt-collection actions, but it ended in July 2020. 

In November, the IRS introduced the Taxpayer Relief Initiative to further help individuals struggling with the economic downturn caused by COVID-19. This initiative focused on helping people who owed taxes or related debt to the IRS, expanding upon current tools to help people pay off what they owe.

Benefits of the Taxpayer Relief Initiative

Qualifying taxpayers will receive the following benefits related to installment agreements and payment plans:

• If a taxpayer qualified for a short-term payment plan, they now have a maximum of 180 days to resolve liabilities, up from the 120-day limit.
• More flexibility is provided for taxpayers who can’t meet the terms of an offer in compromise.
• For companies and individual business owners who have gone out of business because of the pandemic, new tax balances will be added to existing installment agreements.
• Qualifying taxpayers who owe less than $250,000 to the IRS can set up installment agreements without a financial statement, as long as they propose a sufficient monthly payment proposal.
• If a taxpayer only owes money for 2019 and owes less than $250,000 to the IRS, they may be able to set up an installment agreement without an IRS-filed notice of federal tax lien.
• Those who already have an installment agreement may be able to use the Online Payment Agreement system to change monthly payment amounts and due dates.

In addition to these agreement-related relief initiatives, taxpayers also may be able to temporarily delay collections from the IRS, settle their bill at a lesser amount with an offer in compromise, or receive relief from penalties.

These benefits will help Americans find at least some relief as they manage other forms of debt, make mortgage or rent payments, or pay their other monthly expenses.

How to qualify for the Taxpayer Relief Initiative

Some taxpayers may be able to suspend collections by the IRS if they can exhibit a financial “hardship.” This means that if the taxpayer were to pay the IRS what is owed, they would not be able to cover other reasonable living expenses. If the proof is sufficient, the IRS would then classify the taxpayer’s account as CNC, or “currently not collectible.”

To qualify for an offer in compromise, taxpayers need to file an application that outlines their current financial situation. Whereas the IRS might usually cancel an offer in compromise if a taxpayer fails to make their payments, the agency may show much more flexibility.

The installment agreements also have requirements that must be met. Typically, individuals must owe less than $50,000 in taxes, penalties, and interest, or $25,000 for business taxpayers, to qualify for these agreements. 

But the Taxpayer Relief Initiative expanded this requirement so that taxpayers owning between $50,000 and $250,000 may be able to receive a non-streamlined installment agreement, which stipulates that debts must be paid within the 10-year statute of limitations. This is an option if a taxpayer’s case has yet to be assigned to an IRS officer.

This overview covers the basics of the Taxpayer Relief Initiative. But there are more aspects to this program, and a tax professional can help you understand how it could impact you. 

Assistance taking advantage of every new initiative

If you have questions about your tax debt or the IRS’s Taxpayer Relief Initiative, it’s beneficial to work with a tax expert who can walk you through all of the requirements and steps. The 2020 tax year is unlike any other, given government relief programs and often drastic changes to incomes because of the pandemic.

The team of experienced tax professionals at Provident CPA & Business Advisors can help. Contact us today to learn more.