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Can I suspend my IRS Installment Agreement due to Covid-19?

On Behalf of | May 5, 2020 | Firm News |

In response to the COVID 19 crisis, the IRS will allow you to suspend payments on all existing IRS installment Agreements, but for most people on a direct debit payment, you need to suspend the Direct Debit – IRS won’t automatically do it for you.

The provision is in The IRS People First Initiative, announced on March 25, 2020. It allows taxpayers with an installment agreement, including a direct debit installment agreement, to suspend any payments due between April 1, 2020 and July 15, 2020. In addition, the IRS will not default any installment agreements for nonpayment between April 1, 2020 and July 15, 2020. However, by law, interest continues to accrue on any unpaid balances.

How to suspend installment agreement payments:

If your account is automatically debited each month then to suspend direct debit you need to

(1) contact your bank directly;

(2) share the IRS People First Initiative Information Release IR 2020-59 with their bank; and

(3) ask their bank to temporarily stop deducting the IRS installment payments from their account until July 15, 2020.

A direct debit agreement (DDIA) is an installment agreement where the taxpayer allows the IRS to directly debit (automatically take out of their bank account) the agreed upon installment payments.

If you mail a check each moth then you have a  “regular installment agreement”. A taxpayer with a regular installment agreement can simply choose not to make any payments through July 15, 2020. There is no need to notify the IRS, and the IRS will not default the agreement before July 15, 2020.

In either event, you need to re-start your payments by July 15, 2020 or you will default your installment agreement and will then need to get a new agreement, which may be difficult because the IRS will show that you defaulted on an existing agreement.  If your circumstances have changed, you can request the IRS to modify your installment agreement.

Also bear in mind that 2019 taxes are extended to July 15, and that even if you can’t pay, you will do better to file without the payment to avoid the very large failure to file penalty. See our blog about paying the IRS.

If you are in need of assistance in dealing with the IRS, Contact us  and see how we can assist you.