IRS Resuming Normal Collections Activities

With the onset of the COVID-19 pandemic last spring, the IRS temporarily suspended many of its collections activities in order to provide relief for individuals and businesses experiencing financial difficulties as a result of the pandemic. Some of those relief measures expired after a few months, but others, such as the suspension of systemic lien and levy programs, have continued until now. However, the IRS recently announced that these remaining relief measures will end this summer, as the IRS returns to its normal collections procedures.

Background

The majority of IRS compliance operations were suspended on April 1, 2020, in response to the onset of the COVID-19 pandemic in the United States. In addition to giving taxpayers additional time to file returns and pay taxes, the IRS suspended enforcement actions such as liens and levies, and allowed taxpayers with existing installment agreements to skip payments temporarily.

While the measures discussed above expired on July 15, 2020, the IRS continued the suspension of its systemic and automated lien and levy programs and Federal Payment Levy Program (FPLP). The IRS also stopped issuing certifications of seriously delinquent tax debt to the State Department, which prevents taxpayers from being able to get a passport. These certifications have since resumed, and the IRS is now resuming the automated liens and levies as well. Taxpayers who owe the IRS delinquent liabilities and who are not already in some kind of payment arrangement with the IRS are encouraged to come into compliance as soon as possible to avoid being subject to these enforcement actions.

Applicable Enforcement Actions

The following enforcement actions have either already resumed or are scheduled to resume by August 15, 2021:

1. Passport Certifications (Notice CP508C)

Under current law, when an individual has “seriously delinquent” tax debt – currently defined as more than $54,000 in taxes, penalties and interest – without having an installment agreement or other payment arrangement in place, the IRS can issue a Notice CP508C to the State Department. Once issued, this certification will prevent the individual from being able to acquire a United States passport, and it could also result in the revocation of an existing passport. The IRS temporarily paused the issuance of these certifications at the outset of the pandemic, but they resumed in March 2021.

Once a certification is issued, it can be reversed if any of the following occurs:

• The delinquent balances are paid in full
• An installment agreement is entered into
• An offer-in-compromise is submitted and accepted for processing
• The taxpayer is placed in currently not collectible (CNC) status
• The taxpayer files for bankruptcy

Once any of those conditions exists, the IRS will typically issue a Notice CP508R to reverse the certification within 30 days.

     2. Federal Payment Levy Program

Beginning July 15, 2021, the IRS has resumed the FPLP. Authorized by IRC Sec. 6331(h), this program allows the IRS to collect overdue taxes through a continuous levy on the following federal payments:

• Federal employee retirement annuities
• Federal payments made to you as a contractor/vendor doing business with the government (including defense contracts)
• Federal employee travel advances or reimbursements
• Certain Social Security benefits
• Some federal salaries
• Medicare provider and supplier payments
• Railroad retirement board benefits paid to you
• Military retirement

    3. Systemic Liens and Levies

These are liens and levies that are processed by the IRS Automated Collection System (ACS), rather than being issued by a revenue officer that the case is assigned to. Beginning August 15, 2021, taxpayers who have not entered into an arrangement with IRS Collections could be subject to these types of liens and levies.

Avoiding IRS Enforcement Actions

To avoid or release an IRS levy, a taxpayer can enter into an arrangement with the IRS such as an installment agreement, offer-in-compromise, or CNC status. To be eligible for one of these collection alternatives, a taxpayer must be current with all tax filings, and they must be in compliance with payment requirements for the current tax period. If a taxpayer files for bankruptcy, the IRS is requires to release levies and stop all collection efforts until the conclusion of the bankruptcy proceedings.

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