Coronavirus Tax Relief: Everything We Know

As the United States begins what could be a months-longs process of combating and reducing the spread of COVID-19, also known as the Coronavirus, the toll that the virus is expected to take is hard to estimate with accurately. But aside from the very real and dangerous impacts COVID-19 is having on people’s health, it is already taking a major financial toll on people from all walks of life. Fortunately, the IRS has announced a handful of coronavirus tax relief measures to help reduce the financial impact of the disease should it continue to grow.

We want to provide an overview of the COVID-19 tax relief measures the IRS has announced and how they work. We’ll also cover the ways in which they can offer your family tax relief during this national emergency.

Before We Begin, a Note on Coronavirus:

We are a full-service tax relief firm comprised of tax attorneys and expert tax relief specialists; we are not doctors, scientists, or epidemiologists. For updated information regarding COVID-19 and its spread, or how you can help protect yourself and your family, please follow the guidance of these organizations: 

Coronavirus Tax Relief Measures from the IRS

The COVID-19 pandemic is a dynamic situation that will continue to rapidly develop over the following weeks. It seems pretty likely that these COVID-19 tax relief measures will change as the situation does. We’ll be updating this article as the IRS updates its list of coronavirus tax relief plans.

1. The People First Initiative

This sweeping set of tax measures, unveiled on Wednesday, March 25, is the most comprehensive tax initiative the IRS has released in response to the COVID-19 pandemic.

The People First Initiative provides those struggling with tax debt with tax debt relief through July 15, 2020.

These protections include the following coronavirus tax relief measures related to several key IRS programs:

Offers in Compromise (OIC)

The IRS has implemented a number of changes to assist those taxpayers utilizing the Offer in Compromise.

  • New Offer in Compromise Applications. The IRS allows people who are facing tax debt that seriously exceeds their ability to pay to apply for a “Fresh Start” through the OIC process.
  • Pending OIC Applications. You now have until July 15 to provide any additional info to support your pending OIC, and the IRS will not close your pending application without your consent before July 15.
  • OIC Payments. You have the option to suspend all your Offer in Compromise payments until July 15. Interest will still accrue on the unpaid balance.
  • Delinquent Return Filings. The IRS will not default any Offers in Compromise if you haven’t filed your tax return for 2018. However, they still require you to file your returns for 2018 and 2019 by the new tax filing deadline, July 15.

Installment Agreements

  • New Installment Agreements. If you are unable to pay your federal taxes and you’re saddled with tax debt, you can still apply for a new installment agreement.
  • Existing Installment Agreements. For taxpayers under existing Installment Agreements, you will not need to make any payments between April 1 and July 15, 2020. The IRS has suspended them. And you may suspend any Installment Agreement you are currently unable to comply with. Additionally, the IRS will not default any Installment Agreements during this period. Interest will still accrue.

Liens, Levies, and Other Tax Debt Consequences.

If you’re struggling with tax debt, the IRS can place a tax lien on your home or levy your property. They may be able to prevent you from getting a passport and turn your debt over to a private debt collection company. During the period from April 1 to July 15, these actions have been suspended.

2. High-Deductible Health Plans and the Coronavirus

According to the IRS, you may use your high-deductible health plans (HDHPs) to pay for COVID-19 testing and treatment without jeopardizing their status.

The IRS outlined its new coronavirus tax relief measure on Wednesday, March 11. Additionally, those with HDHPs that cover these health expenses can continue making contributions to health savings accounts, or HSAs. Essentially, a high-deductible healthcare plan can provide testing, treatment, and any vaccination costs that might be considered preventative care without a deductible (or without the minimum deductible). If you have an HDHP, you won’t be disqualified from making tax-favored contributions to your HSA.

You can read the full update from the IRS here.

3. Can I Get a Tax Extension Because of the Coronavirus?

There are dozens of reasons the IRS might delay the tax deadline beyond April 15. They employ many of them each and every year. For example, the IRS will often provide an extension for the tax filing deadline if you’ve been the victim of a severe natural disaster like a hurricane, wildfire, tornadoes, or flooding.

In situations like these, filing your taxes like you normally would simply may not be feasible. International travel or deployment and illness or death are common reasons for tax filing delays. If you work with a tax preparation service, you may not be able to contact them. Alternatively, a natural disaster can destroy your necessary tax documents. Or, you may just be stretched too thin to take on the tax filing process. That’s why the IRS steps in to offer some level of tax relief through deadline extension. Having extra time to file your tax return and pay your taxes can go a long way.

As of March 21, the official federal income tax filing day has been moved from April 15 to July 15.

(Background: President Trump announced Wednesday, March 11 that he would instruct the Treasury Department to allow businesses and individuals negatively affected by the coronavirus to defer their tax payments beyond that deadline—if they have suffered adverse effects from COVID-19. This was ultimately extended by 90 days to July 15.)

Tax Filing Extension & Coronavirus

For the time being, it’s still a good idea to proceed with your tax return filing as planned. If you’re expecting a refund, it’s always smart to file early still to ensure the IRS gets your return and refund processed—and put money back in your pocket. If you’re anticipating you may be unable to file by July 15, you can always file for a tax extension. It will provide you with an additional six months to file (not pay) your taxes.

The next few months are uncertain and you may be feeling anxious. Whether you choose to file your taxes or a tax extension, it may serve you well down the line and help you avoid additional stressful situations later this year.

4. Coronavirus Payroll Tax Cut

Another tax relief measure proposed by President Trump could benefit businesses looking to stem losses caused by the coronavirus.

According to the massive Coronavirus tax bill, companies can pay their 2020 payroll taxes for 2020 through the end of 2020. They will need to pay 50% by the end of 2021. 

Trump and other officials had floated this idea with the express goal of jolting spending by U.S. consumers who may otherwise be opting to spend less and stay in more, adding more fuel to the already bearish economy. However, it stops short of the longer delay they had originally proposed. With a payroll tax cut down to zero percent, workers would save 6.2 percent of their salaries, up to $137,000.

5. Deferred IRS Payments

Treasury Secretary Steve Mnuchin announced the newest COVID-19 IRS tax relief measure on Tuesday, March 17. It may help those expecting to owe taxes this year.

The IRS will defer up to $1 million for individuals and $10 million for corporations of tax payments for 90 days—with no penalties or interest.

This measure, similar to the proposal to send stimulus checks to all Americans, is intended to inject more money into the rapidly stalling economy. Because the IRS takes in so much money each year during tax season, this deferment will inject about $300 billion in the economy.

However, it’s not a full elimination of your tax bill; it’s simply a deferment. Since most taxpayers and businesses are feeling a serious financial bind right now, having the cash on-hand for 90 days longer could be a huge relief. You’ll still need to pay that total eventually to avoid accruing tax debt. And if you expect to receive a tax refund this year, instead, it’s in your best interest to still file your taxes as soon as you can to get that refund as soon as possible.

The IRS will provide updates surrounding this coronavirus tax relief measure, and we’ll update you here when we have them.

6. Coronavirus-related Paid Leave

On March 18, various federal departments were directed to support workers via the Families First Coronavirus Response Act. The act offers two primary benefits, improving sick leave and reimbursement for paid leave; as well as tax credits for small businesses.

Paid Sick Leave for Workers

For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid child care leave when employees’ children’s schools are closed or child care providers are unavailable. Employers will receive 100% reimbursement for that paid leave, meaning that employers do not face a payroll tax liability or need to cover any of these costs. It also covers health insurance costs. Fortunately, the IRS didn’t leave self-employed individuals out in the cold. If you are self-employed, you can receive an equal credit.

7. IRS Tax Relief for the Unemployed and Recently Laid Off

In the last few weeks, the United States has seen a surge in unemployment numbers, as many businesses have been forced to close or reduce their hours. Unfortunately, that has left millions out of work and without their regular income. And for those struggling against tax debt, this unemployment can be even more devastating.

For those who have lost regular income through layoffs or unemployment, you can file for Currently Not Collectible (CNC) status.

With CNC status, the IRS determines they cannot collect your debt for the time being. This will give you a reprieve from the stress of dealing with the IRS, as well as additional time to make your resolve your tax debt in the long run. If you’ve suffered unemployment due to the COVID-19 pandemic, we can help you apply for this tax relief program immediately.

COVID-19 Tax Relief: A Long Road Ahead

Although the exact extend of the COVID-19 pandemic remains to be seen, we know this is a frightening and potentially financially difficult time for you and your family. However, the IRS and federal government will likely continue to enact coronavirus tax relief measures to help you weather the long journey ahead.

We will closely monitor the situation for updates to ensure you have the tax relief information you need. Bookmark this article, or simply return whenever you want for the latest information on COVID-19 tax relief measures. In the meantime, we’re wishing you and yours safety and health in the months ahead.

 

If you are currently dealing with tax debt, IRS audit, or other IRS issues, we are always here to help. Simply get in touch with one of our expert tax relief specialists using our free live chat service and get the help you need today.

Last Updated: March 27, 2020

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