If your clients have installment agreements with the  IRS be aware that IRS is updating  their criteria   on which it provides answers to taxpayers with existing installment agreements. The suspension through July 15, 2020 of due dates under those agreements is being reviewed. Care should be taken in reviewing these agreements so that your clients are complying.

Code Sec. 6159(a) allows IRS to enter into written agreements with delinquent taxpayers under which such taxpayers may pay their taxes in installments (installment agreements).

The IRS initiated the  “People First Initiative” in the form of  IR 2020-59. This pronouncement  allowed taxpayers with an installment agreement, including a direct debit installment agreement, to suspend any installment payments due between April 1, 2020 and July 15, 2020 (“suspension period”).

It was clear that the IRS updated their internal directives on defaulted installment agreements. The suspension effected any taxpayers that did not default on any installment agreements for nonpayment between April 1, 2020 and July 15, 2020.

However, by law, interest continued to accrue on any unpaid balances. (IR 2020-59).

It would be productive to review the Frequently Asked Questions (FAQ) about suspended installment payments that were in place as of April 1, 2020.

In June, IRS provided answers to frequently asked questions (FAQs) about the suspended due dates, under the People First Initiative, for installment agreement payments.

 IRS has updated their website which included the following reminders:

Reminder regarding interest and penalties while installment agreement is in effect. Though interest and late-payment penalties continue to accrue on any unpaid taxes, the failure-to-pay-tax penalty rate is cut in half while an installment agreement is in effect. The usual penalty rate of 0.5% per month is reduced to 0.25%.

Where taxpayer is unable to meet his current installment agreement terms. If a taxpayer cannot meet their current installment agreement terms due to a COVID related hardship, they can revise the agreement on plan or call the customer service number on their IRS notice if they have a Direct Debit Installment Agreement.

IRS monthly payment vouchers. IRS did not mail monthly reminder payment vouchers during the suspension period due to IRS office closures caused by COVID-19. IRS will resume mailing reminder notices as IRS offices re-open.

Taxpayers must resume making payments with their first payment due on or after July 16, 2020 to avoid default, even if they do not receive their monthly reminder notice.

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About William Murphy

William F. Murphy is the owner of Murphy Financial Group, P.C. The firm emphasizes in providing tax consulting and financial planning services to corporations, professional practices and individuals. He also provides consultation services on tax and financial planning issues to various news and publishing organizations on current tax law changes occurring within federal and state government. He is also the author of the “Murphy Minute” that is syndicated through various news organizations. Mr. Murphy is also associated with the law firm of Mallor Grodner LLP. The firm has offices in both Indianapolis and Bloomington Indiana. He assists in providing tax, valuation and financial analysis services focusing in the areas of Family law and business tax planning.