2020 was a tough year for all of us. The COVID-19 pandemic turned our world upside-down, with millions of Americans losing their jobs, becoming displaced, or being quarantined and working from home. The pandemic made every aspect of life more difficult, and taxes were not exempt from those changes and difficulties. The new relief provisions were a welcome addition for Americans, but tax experts and even the IRS are still reeling from how to deal with the fallout. With all these emergency precautions taken over the past year, the IRS has become overwhelmed and is trying to figure out how to deal with all the last-minute updates. Luckily, you and your business can easily come out on top. If you have been impacted by COVID-19 and you are facing a tax issue, contact Inside Out Tax Resolution Services today.
Reasonable Cause and First-Time Penalty Abatement
If you failed to file, pay, or deposit taxes in 2020 due to circumstances revolving around the pandemic, the IRS will consider waiving penalties so long as this is your first blip. This is commonly referred to as First-Time Penalty Abatement. If you have other issues, then this will be considered on a case-by-case basis. These types of penalty relief have to meet what the IRS considers Reasonable Cause. There are a few exceptions for this, but most notably in 2020, death, serious illness, or unavoidable absences meet these criteria. That applies to both yourself and if you were caring for a loved one like a spouse, a parent, or a child.
Another category under Reasonable Cause, and one that is extremely applicable to this past year, is fire, casualty, natural disaster, or disturbance (IRM 18.104.22.168.2.2.2). According to the government and the IRS as a whole, the COVID-19 pandemic was considered and declared a national disaster. This distinction allows you to file for penalty relief with nothing more than COVID-19 as your reasoning. You can also file for abatement if you were unable to obtain records due to closures or even due to erroneous legal advice due to the rapid changes to the tax laws in the past year.
Taxpayer Relief Initiative
In November of 2020, the IRS announced the Taxpayer Relief Initiative to give taxpayers more leeway in what has been a historically difficult year for Americans. Americans who have struggled to pay their tax bill have always had the option of short-term extensions, installment agreements, or Offers in Compromise, but this initiative expands the capabilities of those programs to make them more accessible. If you have an unresolved tax issue from 2020 or even a prior year, then this year is the perfect time to take care of that with the IRS.
These two amendments are just the tip of the iceberg when it comes to tax law changes from 2020. Luckily, you can easily take advantage of this information and more by consulting with Inside Out Tax Resolution Services. Contact us today to see how we can help navigate complicated collection issues and resolve your tax problem.