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Year in Review – Administration

Posted on Dec. 30, 2020

This review of 2020 legislation is cribbed from a presentation given by LaKesha P. Thomas, Esq., Clinic Director at Three Rivers Legal Services (FL); William Schmidt, Clinic Director at Kansas Legal Services; and Caleb Smith, Associate Professor of Clinical Law at University of Minnesota Law School.

The biggest administrative action taken by the IRS in 2020 derived from its power under 7508A which gives the IRS the power to waive many requirements when a declared disaster occurs. We discussed 7508A and the power it grants to the IRS as well as the power the IRS exercised in numerous posts over the year. You can find them here, here, here, here and here. In addition to the “normal” powers granted to the IRS under 7508A, 2020 also brought the possibility of new power and postponement created by 7508A(d) passed just before the pandemic arrived in the United States but without thought of how it would operate in the setting of a global pandemic. Figuring out exactly what 7508A(d) means is something still underway as we discussed here. In general, the IRS exercised its power to postpone in a broad manner through Notice 2020-23 and other notices exercising the power granted in IRC 7508A.

Notice 2020-23: Tax Action Relief

Taxpayers have until 7/15/2020 to perform the following time-sensitive tax actions if normally due on or after 4/1/2020 and before 7/15/2020:

  • File U.S. Tax Court petition
  • Filing a claim for refund or credit
  • Filing a suit for a claim for refund or credit
  • All actions listed in Rev. Proc. 2018-58
  • 180-day qualified opportunity zone investment period
  • Related Tax Changes IR-2020-59 -Installment Agreements:
  • Payments between 4/1/2020 and 7/15/2020 are suspended.
  • The IRS will not default IAs during this period.

Notice 2020-18

Pursuant to this notice certain federal income tax payments and income tax returns due on 4/15/2020 were postponed until 7/15/2020 creating perhaps the longest filing season ever.This relief applied to:

  • Individuals filing the Form 1040 series
  • Trusts and estates filing a Form 1041
  • Partnerships filing Form 1065
  • Corporations filing the Form 1120 series
  • 2019 federal income tax payments, and •2020 federal estimated income tax payments. The relief does not apply to: •Federal payroll taxes, and Federal information returns.
  • If the TP needed beyond 7/15/2020 to complete a postponed tax returnthe taxpayer could file Form 4868 or Form 7004 by 7/15/2020 extending the due date until 10/15/2020

-Under IRS FAQs, the following were permitted until 7/15/2020:

2019 IRA and HSA contributions, and 2019 employer contributions to qualified retirement plans.

-Interest, penalties, and additions to tax for failure to pay began to accrue on 7/16/2020 for all federal income tax payments subject to postponement.

There was no stated relief from 2020 estimated tax underpayment penalties.

Taxpayer First Act –

Expands/Strengthens Taxpayer Rights and Reforms the IRS

List of different IRS actions here. The IRS issued several News Releases:

  • IR-2020-206, IRS adds six more forms to list that can be signed digitally; 16 now available
  • IR-2020-188, IRS updates procedures for designating taxpayer disputes for litigation, implementing provisions of Taxpayer First Act
  • IR-2020-55, IRS announces waivers for Offer in Compromise applications
  • IR-2020-27, IRS launches Identity Theft Central
  • IR-2019-206, IRS: Recent legislation requires tax exempt organizations to e-file forms

Suspension of various IRS activities from April 1 to July 15 (installment agreement payments suspended, initiating new liens and levies suspended, etc.)

List of changes here.

COVID-related collection procedures – Taxpayers owing less than $250,000 wanting an installment agreement may not need to submit a financial statement may not have a notice of federal tax lien filed in their case. List of changes here.

Current E-Signature and e-communication procedure –electronic signatures and e-mailing more accepted by IRS

The IRS announced that next year it will introduce a secure portal to submit Forms 2848 and 8821 and a Tax Pro Account for e-signing 3-party authorizations. The disruption caused by the shut-down of the IRS for several months left practitioners unable to access eServices and ascertain information about their client’s accounts in addition to being unable to call the IRS to learn about the accounts. Creating a secure electronic system that allows practitioners to have access to this information has become more critical. Even after the IRS employees began returning to work the low staffing of the CAF units left practitioners without an effective means of using eServices.

Even as the IRS returned to work in the summer it acknowledged that taxpayers continued to need relief and that it had to temper its collection activities until it could work through the huge backlog of mail awaiting its staff as they returned to work. It created the Taxpayer Relief Initiative:

Under the new IRS Taxpayer Relief Initiative, changes to collection procedures are as follows:

  • Payment plan extensions. “Taxpayers who qualify for a short-term payment plan option may now have up to 180 days to resolve their tax liabilities instead of 120 days,” the IRS said.
  • Less documentation required. Certain qualified individual taxpayers who owe less than $250,000 may set up installment agreements without providing a financial statement or substantiation if their monthly payment proposal is sufficient.
  • Tax liabilities automatically added. The IRS will automatically add certain new tax balances to existing installment agreements. The agency says this new “taxpayer-friendly approach” will help some taxpayers avoid defaulting the agreement.
  • More flexibility. In cases where taxpayers are temporarily unable to meet the payment terms of an accepted Offer in Compromise, the IRS says it will be “offering additional flexibility.”
  • Option to make changes online. Instead of having to talk to the IRS about having changes made to an existing installment agreement, qualified taxpayers with installment agreements paid by direct debit will now be able to make changes online. The IRS said, for example, that taxpayers could “propose lower monthly payment amounts and change their payment due dates.”

It allowed individuals entering into an installment agreement for 2019 taxes to have no notice of federal tax lien filed for tax liabilities up to $250,000. It will be interesting to see what long term changes to IRS collection practices may result from the pandemic both in the way taxpayers and practitioners contact the IRS and in the decisions the IRS makes regarding collection from outstanding accounts.

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