Understanding The IRS Collection Process And Legal Notices
Taxpayers owing back taxes eligible for a penalty relief
December 28, 2023
If you owe back taxes to the IRS, today might be your lucky day! The IRS has suddenly gone soft and announced a huge $1 Billion penalty relief program for individual taxpayers, businesses, trusts, estates, and nonprofit organizations. Nearly 5 million tax return filers are eligible for the fine waiver. Also, the eligible taxpayers do not need to submit any application. The penalty waiver will be applied automatically. Hence, the IRS will notify individuals of their remaining tax debt after penalty deductions.
IRS is providing a financial breather to taxpayers.
Many experts deemed it as a “financial breather” for low-income taxpayers. Sean Lovison, founder of Philadelphia-area Purpose Built Financial Services said “IRS is providing a financial breather to taxpayers.”
In this blog, we will share the details of this recent update and discuss what penalty reduction procedures you are eligible for if you missed out on this one.
The IRS halted follow-up reminder notices to taxpayers with liabilities
Every state, economy, business, and individual faced financial crises during Covid-19. However, taxes didn’t go away. Although the Internal Revenue Service collects taxes in full mostly, the federal agency has delayed tax collection activities for the 2020-21 financial year. It is important to note that despite the fact that the IRS stopped sending out follow-up notices, they did send the initial notices. Also, the failure-to-pay penalty continued to accrue for taxpayers who did not fully pay their bills.
The IRS is also taking steps to waive the late payment fines for eligible taxpayers. The IRS estimates that 5 million tax returns – filed by 4.7 million individuals, businesses, trusts, and estates are eligible for the penalty relief. This represents $1 billion in savings to taxpayers, or about $206 per return filed during 2020-21. For small business owners and taxpayers with low income, this will be welcoming news. To find out whether you are eligible for the relief or not, have a look at the table below.
Eligibility Criteria for Relief | Requirement |
| Assessed Income Tax (as of December 7, 2023) | Less than $100,000 |
| Initial Balance Due Notice Issued on/before Dec 7, 2023 | Yes |
| Liability for Accruals of Additions to Tax (Relief Period) | § 6651(a)(2) or 6651(a)(3) |
| Taxable Year 2020 or 2021 | Eligible for Relief |
Exclusions | Applicable additions, penalties, or interest |
The IRS is speeding up tax collection now
As we move ahead, the IRS has been preparing to resume tax collection efforts. Therefore, starting next month, the IRS will be issuing special reminder letters. In January, the IRS will begin sending automated tax collection notices and letters to individuals with tax debts.
In the recent update, the IRS noted:
“As the IRS has been preparing to return to normal collection mailings, we have been concerned about taxpayers who haven’t heard from us in a while suddenly getting a larger tax bill. The IRS should be looking out for taxpayers, and this penalty relief is a common-sense approach to help people in this situation,” said IRS Commissioner Danny Werfel. “We are taking other steps to help taxpayers with past-due bills, and we have options to help people struggling to pay.”
Moreover, the penalty waiver should not be mistaken for an interest waiver as well. The IRS is still entitled to collect interest on any unpaid tax debt. Besides, interest cannot be reduced due to a reasonable cause.
As responsible tax consultants, LifeBack Tax Relief urges taxpayers and businesses to pay their taxes at the earliest. Failing to do so, will result in severe repercussions. However, if you do not have the means to clear your tax debt, there are other options to consider.
Payment options for taxpayers who need assistance
It would be comforting to know that you got the penalty cut. However, are you in a position to pay off your tax debt? If not, then we have listed a few options that can be the icing on the cake! The IRS Fresh Start program offers some key pathways to pay your tax obligations.
1. Installment Agreements
The first and most sought-after option is the installment agreement. Taxpayers can negotiate a payment plan with the IRS, allowing them to pay their tax debts in smaller monthly installments.
2. Offer in Compromise (OIC)
Second is the Offer in Compromise (OIC). The OIC provides much-needed relief to taxpayers who are not capable of clearing their debt either in installments or in one go. It allows taxpayers to settle their tax debts for less than the full amount owed. To qualify for an OIC, individuals must meet specific criteria and demonstrate their inability to pay the full debt.
3. Tax Lien Withdrawal
Last but not least is the tax lien withdrawal program. The program addresses tax liens, allowing for the withdrawal of liens if taxpayers come to an arrangement with the IRS. As a result of tax lien withdrawal, the individual’s creditworthiness increases. Subsequently, taxpayers and businesses can get loans and mortgages at normal interest rates.
Team up with the tax experts
Once penalties are canceled, there is still a lot that needs to be done. Team up with our tax experts to discuss your best course of action.
Having professional help always increases the odds in your favor. Not to mention, tax issues are complex and need experts to oversee the crucial tax of filing returns, or applying for the IRS fresh start program. LifeBack Tax Relief has built a reputation to become the leading tax consultant by earning clients’ trust.
Whether you want to apply for an offer in compromise or tax lien withdrawal, our experts can work their magic to your advantage. To discuss your tax situation, reach out to us today for an in-depth analysis.
Tags :
IRS Financial Breather, IRS Tax Update, IRS update, Penalty relief, Penalty relief 2021 & 2022
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