Taxpayers in direct debit installment agreements with IRS must take action to suspend monthly payments due between April 1 and July 15, 2020, pursuant to the People First Initiative

Overview:

On March 25, 2020, the Internal Revenue Service (IRS) unveiled the People First Initiative, which provides taxpayers with various relief as a result of the difficulties experienced from COVID-19. As part of the People First Initiative, IRS suspended installment agreement payments due between April 1 and July 15, 2020, for taxpayers that are unable to comply with the terms of their agreements.

Read McMahon & Tivnan, PC’s analysis of the People First Initiative

The People First Initiative, however, did not address what action taxpayers in direct debit installment agreements need to take to suspend their automatic payments during this period. Specifically, the People First Initiative did not address whether IRS would automatically suspend debiting taxpayers’ accounts or whether taxpayers would have to request suspension of payments from IRS and if so, how they could do so in light of IRS being unable to provide live telephone assistance due to COVID-19.

On April 23, 2020, IRS released “Installment Agreement Direct Debit Frequently Asked Questions” which provides answers to the above questions (link to FAQ below).

Installment Agreement Direct Debit Frequently Asked Questions

Key Takeaways:

  • Taxpayers in direct debit installment agreements that are unable to comply with the terms of their agreements can suspend payments due between April 1 and July 15, 2020, but must take action to do so.
  • Taxpayers should contact their bank directly to stop payments if they prefer to suspend direct debit payments during the suspension period.
  • If no action is taken by the taxpayer, IRS will continue to debit payments under existing installment agreements during the April 1 through July 15, 2020 period.
  • Installment agreements will not default due to missing payments during the suspension period through July 15, 2020.
  • Interest will continue to accrue on any unpaid balances during the suspended payment period.
  • If taxpayers elect to stop payments, taxpayers must inform their banks to allow the debits to resume at least two weeks before their next payment is due in order to avoid possible default of their installment agreements once the suspension period expires on July 15, 2020.

The information provided in the above does not, and is not intended to, constitute legal advice; instead, all information and content provided in the above is for general informational purposes only. Readers of this material should contact an experienced tax attorney to obtain advice with respect to any particular legal matter.

McMahon & Tivnan, PC is responsible for this content. McMahon & Tivnan, PC represents individuals, estates and businesses with federal and state tax controversies, including audits, appeals, litigation and foreign transaction reporting. Collectively, McMahon & Tivnan, PC’s Boston-based tax attorneys have more than 100 years of experience investigating and defending IRS and state tax matters.