The COVID-19 pandemic has devastated more than just physical health, but also the financial health of citizens across our country. In the first six weeks alone, 30 million people had to file for unemployment and the number has grown steadily since then. Whether having to file for unemployment or not, prolonged shutdowns and “shelter in place” orders have left many families in financial troubles. At Fricke and Associates, LLC, we want to help you navigate your tax challenges during these trying times. If you find yourself behind on taxes due to the pandemic, contact us for a completely confidential consultation to learn more about your options.
The Latest General Updates:
- Stimulus payments—According to the Treasury Department and the IRS, 89.5 million individuals received payments worth nearly $160 billion in the first three weeks of the program. More than 150 million payments will be sent out. Millions of citizens who do not typically file a tax return are still eligible to receive these payments. Payments for people who filed a tax return in 2018 or 2019, receive Social Security retirement, survivor/disability benefits (SSDI), Railroad Retirement benefits, as well as Supplemental Security Income (SSI) and Veterans Affairs beneficiaries were automatically approved.
- Back Taxes—If you owe back taxes, you may have extra time. The IRS has put a hold on certain collection processes as a part of Covid-19 tax relief. This relief is needed since taxpayers that were already behind before this crisis will be even more unlikely to be able to handle the financial strain now. Established in late March, the People First Initiative, brought immediate relief by postponing certain payments related to Installment Agreements, Offers in Compromise, and limiting certain enforcement actions. Through July 15th, the IRS has temporarily modified many of its collection activities as well as minimized in-person contacts. Despite these accommodations, we recommend that you be proactive about resolving tax issues. The IRS will be more lenient and offer better options so now is a great time to start moving forward. Schedule a visit with one of our team members at Fricke and Associates, LLC if you need help with navigating your back taxes.
- Filing and Paying Your Taxes—The deadline is now July 15th. There will not be any additional penalties or interest regardless of taxes owed if paid by that date. When you file, you must send payment for any taxes due. You will have penalties and interest on unpaid balances after July 15th. If you have not filed already, now is a great time to go ahead and gather your documents, look for deductions, and prepare to file.
- Offer in Compromise—The IRS has a program (Offers in Compromise) available which will allow you to settle your tax debt for less than you actually owe if you meet the appropriate criteria. If your financial situation has been impacted by Covid-19, you may qualify. Our team can guide you through the process to see if you would qualify for this fresh start. This program was designed for resolving outstanding tax liabilities, even when the liability exceeds the net worth of the individual.
The IRS’ installment plans are determined based upon whether you owe more than $50,000 or less than $50,000. If you need to utilize an installment agreement, we recommend that you consult with one of our team members first. We can help you save time and money because we are well-versed in the process as well as other relief options.
- Less than $50,000—If you owe under $50,000 and can pay it within 72 months, you are eligible for a streamlined agreement. This means that you will not be required to submit all of your personal information to the IRS.
- More than $50,000—If you owe more than $50,000, you must request your installment agreement using form 433-F Collection Information Statement. This form will require detailed information, including your bank accounts, lines of credit, real estate, total number of dependents, assets, credit cards, wages, non-wage household income, monthly living expenses, down payment amount, and proposed monthly payment.
- Minimum Monthly Payment: $25.00—The length of your installment agreement can vary from 120 days to 72 months depending on your ability to repay.
- Installment Agreements of more than 120 days require a setup fee—Your fee may be reduced if you meet low-income criteria. If you default on your agreement, you will be charged a reinstatement fee.
- Currently Not Collectible—If the information submitted to the IRS on Form 433-A shows that your monthly income is insufficient to cover allowable expenses of living, you may be eligible to apply for currently not collectable status. This does not resolve the debt; the liability remains, and the interest continues to accrue, but the IRS will not take an enforcement action.
- Bankruptcy—Often when people come in with tax problems, they have a whole host of other financial problems such as failed businesses, loans they have guaranteed, and judgments from lawsuits. Sometimes bankruptcy is the best way out. There is no reasonable contribution potential, there is no battle with the government, and there are no appeals. Sometimes it is actually cheaper and easier to simply wipe the whole slate clean. The tax is gone, the other creditors are gone, the judgment’s gone, everything. While bankruptcy is not the best option for most clients, you should know how to use it for those times when it is the right solution.
In this time of uncertainty, having an ally in the financial world is crucial. Our team is standing by to help you handle your taxes. Schedule a consultation in-person or virtually to learn more about your options!