IRS Relents from Collection Action in Coronavirus Pandemic

The Internal Revenue Service has temporarily closed its call-in collection service centers.

 When a taxpayer fails to make a payment due under an installment agreement with the IRS, the IRS writes to the taxpayer declaring the installment agreement in default, and the IRS’ intent to levy (seize) the taxpayer’s wages of bank account funds unless the taxpayer brings the installment agreement current.

With the temporary closure of the IRS call-in collection service centers, a taxpayer who is laid-off and unable to perform an existing installment agreement with the IRS is unable to call the IRS and seek relief from the installment agreement.  This is particularly troublesome in the case of a direct-debit installment agreement, whereby the IRS takes monthly payments on an installment agreement directly from the taxpayer’s bank account by prearrangement with the taxpayer.

On March 25, 2020, the IRS announced its “People First Initiative.”  In it, the IRS declared—

  • The suspension of new liens and levies (including any seizures of personal residences) initiated by field revenue officers.  However, revenue officers will continue to pursue high-income non-filers, and “perform other similar activities where warranted.”
  • That it will “generally” not start new audits, but will continue to work refund claims “where possible,” without in-person contact.
  • The suspension of in-person meetings for current audits, but that it will work audits remotely “where possible.”
  • That the IRS encourages taxpayers to respond to IRS correspondence requesting additional information during this time, if possible.

This guidance is of limited value.  What about levies and lien notices initiated by an IRS service center?  The IRS may seize a personal residence only after exhausting all reasonable collection alternatives, and almost never exercises the authority.  Will the IRS continue taking payments on direct debit installment agreements during this time?

When a taxpayer accrues a federal tax liability and it remains unpaid, a lien (claim) arises in favor of the United States against all of the taxpayer’s property, then-owned or thereafter acquired.  The IRS records notice of the lien in the local register of deeds office, to put the world on notice of the federal tax lien, preventing subsequent purchasers or mortgage lenders from acquiring an interest in the property superior to the federal tax lien. 

IRS collection personnel have informally acknowledged that the IRS is standing down from enforced collection action (i.e., execution of levies of taxpayers’ property, and recording tax lien notices against taxpayers) until July 15, 2020.  The IRS has not said whether it will take payments on direct debit installment agreements during this time.  Hopefully further IRS guidance will clarify IRS collection activities during the pandemic.

Stephen J. Dunn

Tax and Estate Planning Attorney and Author