This Insights article was contributed by Natalie Addy, CFE at Adam Shay CPA, PLLC.
The IRS began mailing their backlog of letters and notices to taxpayers in the agency’s steps to return to normal operations. Because of the COVID-19 shutdown, the IRS has been recently mailing correspondence dated as early as March, 2020. As a result, many of the notices were mailed with past due payment or response dates. To save time and costs, the IRS in most cases will not generate a new notice.
Instead, the IRS will include Notice 1052, Important! You Have More Time to Make Your Payment, as an insert that will provide a new, updated pay or response date. Please read the insert carefully. It explains why the notice was delayed and, more importantly, provides a new date in which to pay or respond.
Below are key points taxpayers should note when the notice is received. They should:
What if you are still unable to make the payment?
- Review the last page of the insert to determine if there is a new due date.
- Disregard the notices if steps have already been taken to resolve the issue.
- Visit IRS.gov/coronavirus for more information.
- Contact the IRS using the number on the notice if you have additional questions. Keep in mind that phone lines remain extremely busy as the IRS has not fully resumed operations.
Times are still tough and people are having a hard time making ends meet. If you are unable to make your payments to the IRS due to the loss of income or increased household expenses, you may qualify for a Collection Alternative which could include an installment agreement, a lower payment amount for existing installment agreements, postponing payments until financial circumstances improve, or an Offer in Compromise.
What if you had an existing agreement?
If you cannot make payments on your existing installment agreement or your offer in compromise agreement you can reach out to the IRS to request revised terms. The IRS may ask you to provide proof of changes in your financial situation by filling out a Collection Information Statement.
If you are asked to provide a Collection Information Statement (Form 433-A or 433-F) you will need to gather the following information:
- Copy of your last tax return.
- Income support (paystubs, social security, pension, self-employment support).
- Bank statements (savings, checking, investment).
- Monthly expenses (utilities, phone, internet, car payment, insurance).
- Any debt (credit cards, loans from lenders).
- Mortgage statements.
- Health care and medical bills.
- Proof of court ordered payments (child support, garnishments).
- Copy of deeds for any real property owned.
After providing the Collection Information Statement it is up to the IRS agent to determine if you qualify for a reduced payment amount.
Preparing and submitting this documentation and negotiating with the IRS can be challenging. It is important that the forms are complete and accurate to avoid a bank levy or garnishment. If you need assistance with a tax liability that you believe is incorrect or that you cannot pay, you should seek help from a competent tax professional with experience managing IRS collection matters.
Caroline Montgomery, CPA (NC License Number 39017), MSA, is tax manager and partner of Adam Shay CPA, PLLC. The most rewarding part of what she does is helping business owners and individuals achieve their goals, all while working with a dynamic team that is growing quickly. The firm focuses on a proactive approach by encouraging clients to minimize taxes via income tax planning and projections, or by focusing on other areas of their business as part of the firm's Virtual CFO services. The firm also offers tax preparation, fraud and forensic accounting and tax issue resolution services. She moved to Wilmington in 2014 and started at the firm in 2015. Caroline graduated with her her undergraduate and graduate degree in 2010 from East Carolina University. She is actively involved with NourishNC as their Treasurer and enjoys volunteering with various organizations throughout New Hanover County. In her free time, Caroline enjoys spending time with her husband, Mike, and dog, Mason, as well as travelling and going to the beach.