By David B. Tibbals and Michael S. Raum
As the nation continues to react to the spread of the novel coronavirus, various government agencies have been forced to institute reductions in service, office closures and other emergency measures.
The Internal Revenue Service has followed suit, announcing on March 24 that it has indefinitely suspended nearly all functions and services requiring face-to-face contact with taxpayers. This has prompted the reduction of regular service hours at IRS local offices throughout the country and closure in areas experiencing more acute effects of COVID-19. The IRS has closed all Taxpayer Assistance Centers nationwide until further notice. Despite those disruptions, certain core services and taxpayer assistance provided by the IRS are still available.
As of now, the IRS continues to accept returns, pay refunds, process exemption applications, and issue certain rulings and determinations. The IRS is also continuing to receive mailed correspondence, though it is only responding in a limited—and very likely delayed—fashion. The IRS is also keeping the Taxpayer Advocate Service available to taxpayers for telephone assistance via local office numbers only.
The following is an overview of how recent announcements impact taxpayers who are involved in ongoing disputes with the IRS at various levels.
All Tax Court Settings Canceled; Advice on Filing Procedures
Since March 11, the United States Tax Court has issued a series of announcements canceling trial sessions from March 16 through July 3. Any further cancelations will be posted on the Tax Court’s website. The IRS has indicated that the Office of Chief Counsel is working to resolve those cases that were on the affected trial calendars.
Tax Court proceedings generally begin when a taxpayer files a petition within 120 days of receiving a statutory notice of deficiency. That deadline is jurisdictional and is met by mailing the petition on time, so proving timely mailing is crucial.
With the March 18 closure of the Tax Court building in Washington, D.C., mail directed to the Tax Court is being held until the building is reopened, which means taxpayers must pay particular attention to obtaining and retaining proof of mailing, whether by postmark or delivery certificate.
The Tax Court is also further directing that “If a document mailed or sent…to the Court is returned to you, the party that mailed or sent the document should remail or resend it to the Court with a copy of the envelope or container in which it was first mailed or sent. Please retain a copy of the document and the envelope for your records.”
Cases currently in litigation are also continuing to be worked by the Office of Chief Counsel, although no face-to-face meetings with taxpayers are being held and no depositions are being taken.
The Appeals Office Continues to Work
The majority of tax disputes are settled in the Appeals Office, either before or after a Tax Court Petition is filed. For the last several years, we have seen an increase in the number of Appeals Officers working remotely from their homes. Over the last few years, the IRS has issued changing guidance on in-person conferences, first drastically reducing them and then revoking those limits. However, most conferences are not in person, and the IRS has been expanding the use of web-based conferences in addition to phone calls.
As a result, despite COVID-19, matters before the Independent Office of Appeals are still being worked, though all taxpayer conferences are now being held via telephone or videoconference.
Compliance and Enforcement Activity Continuing, but on a Limited Basis
On March 25, the IRS announced its “People First Initiative,” addressing uncertainties surrounding compliance activities. Beginning approximately April 1 and initially running through July 15, the IRS will be significantly easing its pursuit of certain collection actions:
- Installment Agreements: The IRS is suspending payments due between April 1 and July 15 for taxpayers under existing Installment Agreements, although interest will continue to accrue. In addition, the IRS “will not default any Installment Agreements during this period.”
- Offers In Compromise: The IRS is allowing taxpayers the option of suspending payments until July 15 for taxpayers with accepted Offers In Compromise, although interest will continue to accrue. Taxpayers with pending applications for an Offer In Compromise will be able to provide any requested information until July 15, and the IRS will not close any pending applications before that time without consent. The IRS also will not default Offers In Compromise for taxpayers as of yet delinquent in filing returns for tax year 2018.
- Liens and Levies: Automated liens and levies and those initiated by revenue officers will be suspended during this time.
- Private Collection Activities: The IRS will not forward new delinquent accounts to private debt collectors during this time.
In addition, during this same time period, the IRS “will generally not start new field, office and correspondence examinations….However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.” Many revenue agents (auditors) already work remotely, and others are being shifted to working from home, so in-process audits will continue.
With that said, the IRS is aware of the organizational burdens taxpayers are currently or imminently facing, recognizing that “the IRS may initiate activities to move forward with an examination – understanding that COVID-19 developments could later reduce activities for an agreed period.”
Much of the IRS’ initial audit processes, however, take place at several large “Service Centers,” staffed by thousands of workers. Those Service Centers are being impacted by COVID-19, including by stay-at-home orders issued by the governors of the states in which they are located. We simply do not yet know the impact of this closure on those Service Centers.
This relief notwithstanding, the IRS is continuing to pursue matters with a pending statute of limitation, and “will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statutes.”
While every situation is unique, we recommend taxpayers in ongoing disputes with the IRS take the following actions:
- If your case has been assigned to a specific employee, try to contact him or her to discuss the matter. Make several phone calls and send correspondence by mail or fax (the IRS generally will not use email). IRS employees are always easier to work with if you have open communication about the process.
- Do not miss any crucial deadlines. Until there has been some formal announcement indicating otherwise, we operate with the assumption that critical deadlines in disputes still apply. Those include, for example, the “hard” deadlines for seeking CDP rights, filing a Tax Court petition, claim for refund, or refund suit, and protesting a proposed assessment to Appeals.
- We recommend that taxpayers also attempt to honor any “soft” deadlines set by agents or officers for responses, even if only with a letter indicating a response is impossible now and seeking more time.
- Do not expect your case to move quickly. The IRS process can be slow at the best of times. We expect things to slow down greatly for at least some time given the ongoing confusion. Recalibrate your expectations about how quickly things may go.
This is a fluid situation and there is a great deal of ambiguity about how things will develop. We continue to monitor the status of the IRS’ operations during this rapidly-evolving situation, and we encourage you to refer to the IRS’ Coronavirus Tax Relief webpage for the latest developments.
Related Articles: Certain Filing, Payment and Other Administrative Relief Available
On March 20, the IRS announced significant changes to the federal tax return filing and payment requirements for the 2019 tax year, offering an extension to July 15 for filing and payment obligations ordinarily due April 15. The extension is available to individuals, trusts, estates, partnerships, associations, companies and corporations. For more details, and for certain state ramifications, please refer to our earlier update, “Income Tax Filing Season Impacted by COVID-19.”
The IRS also earlier announced certain relief with regard to High Deductible Health Plans providing special coverage of testing for and treatment of COVID-19. For more details, please refer to our earlier update, “IRS Provides Relief to High Deductible Health Plans for Expenses Related to COVID-19.”
Moving forward, the IRS will also implement already-enacted COVID-19 stimulus measures and those currently pending before Congress. With the passage of the Families First Coronavirus Response Act, which is discussed in our earlier update, “The Families First Coronavirus Response Act: Requirements and Considerations,” the IRS announced that it will facilitate new payroll tax credits, including sending owed refunds “as quickly as possible.” With regard to potential stimulus payments being discussed in Congress, the IRS will provide further guidance when specific details are available.