It seems like yesterday when the IRS suspended bank levies, liens, and wage garnishments at the onset of the COVID-19 pandemic. Now, that honeymoon is over, and the IRS will be as money-hungry as ever. On the other side of that coin, there may be no better time than now to take advantage of tax relief programs. I’ll explain how to avoid the IRS stick and, instead, grab the carrot below.
Part of the reason the tax collectors will be aggressive is that the United States budget deficit has soared to $864 billion in one month as of June 2020. Much of this is a result of the government-ordered shutdown of most businesses nationwide for months. The deficit is also due in no small part to the 4-month holiday handed to delinquent taxpayers by the IRS Collections division. During that time, there’s been unprecedented government spending and only a trickle of revenue. Now that the holiday is over, expect their enforcement efforts to begin with a vengeance.
When the Internal Revenue Service (and most states) halted enforcement action – including levies, liens, wage garnishments, and asset-seizures – from late March until July 15th, the goal was to provide some relief to delinquent taxpayers who are struggling to make ends meet on a good day. In addition to halting enforcement, the IRS offered three-month holidays for tax filings and installment agreement payments, without penalty. Finally, the IRS also put a moratorium on Offer in Compromise rejections/returns, until July 15th.
The convergence of the end of this holiday – along with the stark news of the June deficit – is now. You and/or your business may not yet be recovered, but the U.S. Treasury is hurting too. This means that IRS employees will be under immense pressure to collect revenue as efficiently and quickly as possible to cover the massive bills our country has incurred by bailing out industries and individuals.
In short, when it comes to the IRS Collections apparatus, there are no signs of mercy on the horizon.
Perhaps the only good news for those who owe back-tax liabilities is the fact that Revenue Officers and Collections Representatives are returning to work with a massive backlog of delinquent taxpayers whose liabilities have only grown in the 4 months since the shutdown began. This means that if you’re faced with a hefty balance due and worrying about wage garnishments and bank levies, you’re not alone. There will be far more delinquent taxpayers for the IRS to go after, and thus the odds of you being targeted immediately might go down a tad – for now.
That does not mean you have time to waste. For one, your tax liability could be at the top of the pile for a given Revenue Officer. For another, your tax liability will be priority #1 soon, and it may be difficult to say when. And when it comes to you or your business’s financial future, the gamble of procrastination has zero upside.
ProPublica recently reported that in 2020 the IRS received its first enforcement budget increase in ten years. This means the IRS is going to be highly motivated to spend 12 months’ worth of an enforcement budget in a measly 8 months. Given that we know government agencies want to spend all of their annual allotment to make sure they don’t get the short end of the stick when budgets are set for the following year, expect the IRS to be particularly zealous from this point forward.
So apart from being rightfully concerned about enforced collections (e.g. bank levies, receivables levies, wage garnishments, asset seizures), what can you do?
First, be proactive. If you can demonstrate that your business has been compliant for even one month (or one pay period?), you or your representative should be gathering data and submitting a proposal for resolution right away. The same holds true for individuals with the caveat that your compliance requirements are typically annual or quarterly. Never underestimate the impact of a well-written, well-organized proposal with supporting documentation. Most tax collectors are used to dealing taxpayers who ignore deadlines, withhold documents, and never bother to call or write the Revenue Officer to plead their cases. When they get a well-packaged proposal, they’re often shocked into submission. This means more time, and usually more leniency.
HAVE A TAX RESOLUTION PRO PLEAD YOUR CASE
Second, if you or your business is not in compliance with tax returns or tax payments/deposits, you need someone pleading your case to the IRS right now. Why? Because absent any contact from a taxpayer, tax collectors will strike first. They’re particularly apt to levy individuals or close down businesses that ignore the IRS completely. Those businesses or individuals who are proactive and submit proposals or Offers in Compromise, however, will be a lower priority for enforcement. You or your company can’t be considered “low-hanging fruit” — ripe for the picking – if you are building a record with the IRS that you are attempting to resolve your tax problem. I have overturned enforcement action through the IRS Appeals Division with less.
DON’T PLAY CATCH-UP WITHOUT FIRST CONSULTING WITH A TAX RELIEF PROFESSIONAL
Third, don’t play catch-up without first consulting with a tax resolution professional. If you fell behind during the pandemic, you’re not alone. Particularly for individuals with delinquent income tax liabilities, if you can demonstrate a legitimate financial hardship, you could potentially render those accruals during the pandemic months – and before – totally uncollectible by law, forever. Even if you’re delinquent with income tax returns, the IRS has to honor the fact that you’re currently experiencing a hardship.
Accordingly, rather than spending thousands in a futile effort to play catch-up on old tax periods, spend a fraction of that money on good representation, which could potentially wipe away that poor tax history with a solid proposal and strong negotiation.
And finally, don’t wait until it’s too late. Preventing a levy or seizure of assets is much easier than arguing for releasing a levy or seizure of assets. There is no better time than now to catch the IRS on its heels, as it attempts to collect from the greatest number of delinquent taxpayers we’re likely to see in our lifetimes.
MHA Tax Group has caring and knowledgeable professionals on staff who would be happy to outline a solution tailored to your circumstances that makes the very best of the unique opportunities that are available right now, and they will do so at no charge. Pick up the phone and give us a call.