Now that the initial April 18 personal income tax deadline has passed, the Internal Revenue Service has released six major changes to collection policies. Taxpayers that have outstanding balances due to the IRS can expect to be impacted in more ways than the traditional paper notices that arrive by mail every few weeks. The following changes are designed to be motivation for delinquent taxpayers to settle all tax debts sooner rather than later.
1. Private debt collection - The IRS has enlisted the help of private debt collection agencies to assist in pursuing old tax debts.
Identity theft is on the rise, especially when it comes to tax returns. The IRS has stated they will be sending letters to taxpayers before the collection agency contacts the individual. Initial contact via mail will state when the debt collector will call.
2. Passport restriction - The Department of State will begin restricting passports for taxpayers that owe tax bills in excess of $50,000 and have not set up a payment plan or agreement.
If a taxpayer has an emergency travel need, they must go through the National Taxpayer Advocate which could take considerable amounts of time, and even then, it could take up to 30 days to lift the travel restriction.
3. Offer in compromise changes - The IRS was once lenient in allowing taxpayers to file delinquent returns while going through the offer in compromise process. As a result of recent changes, all taxpayers that would like to apply for the debt settlement must file all delinquent returns and be up to date on compliance requirements prior to application.
If the taxpayer is not current on compliance and they apply for an offer in compromise, the IRS will reject the offer and keep the down payment included with the application.
4. Expense budget increases - In order for the IRS to determine a taxpayer's ability to pay a delinquent tax debt, expense standards are applied based on where the taxpayer lives and family size. These amounts have been increased to allow additional flexibility for the taxpayer.
If you are a taxpayer that is already in an agreement, you can look to renegotiate the terms using the updated expense amounts.
5. Faster processing time for agreements - Taxpayers who owe between $50,000 and $100,000 may establish installment agreements with payment terms over seven years without filing detailed financial statements with the IRS.
This will streamline the process of entering into agreements with the IRS and it will also assist in releasing the passport restrictions stated above.
6. IRS website upgrades - The IRS will now allow taxpayers or their licensed professionals to look up outstanding balances. In addition, installment agreement requests can be submitted online.
Taxpayers and professionals will be able to access accounts only if they are able to authenticate their identity. The new upgrades will streamline services and bring matters to resolution quickly.
To discuss these changes further please contact your local UHY LLP professional.
Wednesday, April 24, 2019 | 7:30 AM – 9:30 AM EDT | The Hartford Club