covid taxes

How COVID-19 Affects Tax Filing 

COVID-19 all but shattered the glass encasing what we now realize to be a fragile economy. Small businesses, as well as the working class, plummeted into a state of panic as jobs and resources became scarce. The tax season was a blessing for those who received refunds, but for others, it made hard times even harder.

The IRS didn’t hold back on collections and it seems that more people will need help with back taxes next year. COVID-19’s impact brought upon instability and uncertainty, but we might be able to predict what filing taxes will look like next year.

What if I didn’t file this year?

As with any year, if you do not file, the IRS has the power to file on your behalf. You could end up owing more than you should if you did not make as much money as you did the previous year.

You could also be penalized for not paying and receive consequential letters about wage garnishments.

Even if you miss the deadline, it’s best to contact a tax professional, such as TaxRise, to file before you accrue more debt.

Filing in the future

Next year, we’re expecting the number of taxpayers filing unemployed to skyrocket. Due to the pandemic, numerous Americans were laid off and displaced. This means that tax relief programs like Fresh Start could see a spike in eligibility.

Your financial hardship is taken into significant consideration when you apply for this program. If you have tax debt and are affected by COVID-19, you could relinquish a great amount of said debt.

If your current financial situation does not make it feasible for you to pay off your tax debt in full, and your installment plan is unreasonable for current circumstances, you legally are not required to pay it.

This can be found in the Taxpayer Bill of Rights on the IRS website. If taxes will put you in further into financial despair, such as homelessness or poverty, then the IRS must work with you.

Why it’s important to prepare for post-COVID filing

In 2021, because Americans will pay significantly fewer taxes while filing for 2020, the IRS will likely be desperate for backpay. This is an agency that relies heavily on collections to stay afloat. What this can mean is a higher audit rate and harsher penalties for those that didn’t file this year.

It’s important to make sure you’re protected and prepared by seeking professional help. It may seem easier to handle the IRS on your own, and at TaxRise we will always be upfront with you that you are capable of filing without our services. However, there are many codes, laws, and rights that the average taxpayer is not aware of.

In the long run, it is more beneficial to get the best resolution possible for a reasonable fee, instead of paying much more than necessary to the IRS.

Tax Relief and Resources

We’ve received many questions regarding filing resources, such as extensions. The issue with requesting extensions is that your paperwork must be completed and in the possession of the IRS before the tax deadline. You may not plan on needing an extension until a month or so before the deadline, or sometimes closer in proximity to the deadline. The process for requesting an extension is tedious and requires a lot of waiting. By the time you realize you need one, it could be too late to file.

There are, however, four types of settlement opportunities if you happen to miss the deadline. At TaxRise, we have helped clients achieve one or more of the following: offer in compromise, installment agreement, currently non-collectible, and penalty abatement.

The Fresh Start program provides debt forgiveness by allowing taxpayers to pay only a fraction of what they owe. An offer in compromise results in owing less than half of the original debt, while an installment agreement allows the taxpayer to pay in monthly installments, sometimes totaling at a smaller amount than the original debt.

This is the program that many displaced and unemployed taxpayers will likely qualify for in 2021. The IRS would prefer that taxpayers remain in the dark of this program’s existence. This is why at TaxRise we are such strong advocates for the use of Fresh Start.

Prepare today for the fight tomorrow

If you know that you may have misfiled this year, or missed the deadline, get in touch with us today about your options. You do not want to be on the bad side of the IRS by this time next year.

You can start by taking our brief survey to pre-qualify for the Fresh Start Program here.

A TaxRise representative will be in touch with you shortly after.

Any new or systemic Liens and/or Levies will also be suspended for the time being.

For taxpayers who are considered “seriously delinquent”, the IRS will suspend any new certifications for the remaining period. Any taxpayer who falls into this category in reminded and encouraged to enter into an Installment Agreement or apply for an Offer In Compromise.

The IRS will not forward any new delinquent accounts to private collection agencies at this time.

Taxpayers have until July 15, 2020 to verify to the IRS they are qualify for the Earned Income Tax Credit or to confirm their income. If the taxpayer is unable to verify their credentials or provide appropriate documents for this credit, they are encouraged to notify the IRS before the deadline. No cases will be denied this credit for failure to provide requested information until July 15.

Case workers will continue business as usual. However, most case work will be conducted remotely (video/over the phone conferences). Any requests for documentation sent by the Office of Appeals should be responded to in a timely manner to ensure a smooth process.

The IRS will continue to take the appropriate measures to stay compliant and protect the applicable statutes of limitations. In situations where certain statutes may be compromised, taxpayers are encouraged to extend such statutes. Otherwise, Notices of Deficiency will be issued by the IRS and similar actions will be pursued to protect the interests of the government in preserving such statutes. Where a statutory period is not set to expire during 2020, the IRS is unlikely to pursue the foregoing actions until at least July 15, 2020.

Practitioners are reminded that PPS wait times may be significantly longer, depending on staffing levels and allocations going forward. The IRS will continue to monitor this as situations develop.

“The IRS will continue to review and, where appropriate, modify or expand the People First Initiative as we continue reviewing our programs and receive feedback from others,” Rettig said. “We are committed to helping people get through this period, and our employees will remain focused on these and other helpful efforts in the days and weeks ahead. I ask for your personal support, your understanding – and your patience – as we navigate our way forward together. Stay safe and take care of your families, friends and others.”

Learn how easy it is to qualify for tax savings.

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