IRS Tax Collection Activities to Resume July 15

In response the COVID-19 pandemic, the IRS has issued a “Memorandum For All Collection Executives” and Notice 2020-23, which combined suspend until July 15 both: (1) most deadlines for tax payments and return filings; and (2) IRS collection activities. During this suspension period, most IRS offices have been closed, and most of the IRS’ visible activities have centered on distribution of the stimulus payments to taxpayers. However, that does not mean the IRS’ collection work has completely stopped. During the suspension period, the IRS collection officers have been working remotely and continuing to do the “back office work” to have their collection cases ready to proceed once the suspension period ends. Accordingly, after July 15 there may be an unprecedented surge of IRS collection activity directed at taxpayers, such as liens, levies, garnishments, decisions on previously submitted Offers in Compromise and passport revocations. In addition, currently there are discussions in Congress of increasing the funding of the IRS’ operating budget, which may fuel greater IRS collection activities in the future.

In a recent national forum, top IRS brass suggested some regions of the country may see more of a quick “wave” of collections, while others may not, depending in part on an evaluation of how badly the region has been impacted by the pandemic. While the IRS hopefully won’t immediately unleash a torrent of collection notices, relying on hope isn’t usually sound planning.

Accordingly, much like the IRS, taxpayers and practitioners would be well-advised to use the remainder of whatever “breathing space” remains to proactively prepare before the IRS resumes collection activity. Proactive preparation should include gathering the facts of the taxpayer’s case, organizing the documentation for their tax collection case, preparing missing tax returns, evaluating the available potential collection alternatives (such as Offers in Compromise, installment payment arrangements, penalty abatements and currently not collectible status) and preparing the appropriate financial disclosure documents (such as the applicable version of IRS Form 433) that the IRS requires before considering collection alternatives.

Bottom line: any taxpayer with an account in IRS collection should ideally, by July 15, have determined which collection alternative(s) is/are viable, based on fully assembled documentation and properly prepared financial forms (including Forms 433). That way if/when the IRS collection “wave” comes crashing in, the taxpayer can ride it to a successful outcome.