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Tax Resolution

Are You Eligible for Interest Check This Year?

Taxes should be filed on April 15 of every year. However, because of the COVID-19 pandemic, it was understandable that a lot of people failed to file their taxes on time.

The Internal Revenue Service (IRS) moved the due date this year to July 15 to give way to those affected by the pandemic. Those who filed their taxes after April 15 are in luck because they would be getting extra money from the government. It is referred to as an interest check.

Let’s discuss this unusual extra money this year: Every year, the IRS has to pay interest on refunds because the federal government takes some time to actually process them. The IRS admitted that as of June, it has a backlog of 4.7 million returns.

According to the IRS, the accrual period for this interest check will start on April 15. This means that if you filed your tax return later, then you are going to get an interest check. The interest payments will or might be sent as a separate check from the actual refund. Of course, with the backlog, you might receive your refund later. This means additional interest.

Stimulus payment

Note that this is different from the stimulus payment from the government. The Coronavirus Aid, Relief and Security Act, which is wittily referred to as the CARES Act, is a law signed by President Donald Trump to give financial assistance to the millions of Americans affected by COVID-19.

Don’t be confused considering that the stimulus check is also issued by the IRS and is based on a person’s adjusted gross income. If you already received a stimulus check, then expect another check coming. Of course, that is granting that you are eligible for it.

If you are a taxpayer who didn’t receive a refund by April 15, then the months that you didn’t get it will incur an interest. The total amount of the interest will be sent to you as a second check.

Wondering how much you will get?

The IRS will pay an annual interest of 5% that will be compounded each day until June 30. By July 1, the interest rate would have decreased to just 3%. What would this entail? This means that for every $1,000 that should have been refunded to you, you will get 14 cents as interest every day from April 15 to June 30. This would decrease to just 8 cents every day starting on July 1.

The IRS, though, is yet to announce the date of the release of the interest checks. It is hoping that it will be out later in the summer.

Of course, the interest is taxable. It will be part of your taxable income in your 2020 tax return. At least, it will be available at a time when a lot of people really need the money. COVID-19 affected a lot of people and not just in terms of health. A lot of people also lost their jobs while some experienced shorter work hours.

Offer In Compromise & COVID-19

The novel coronavirus (COVID-19) has resulted in a serious plunge in America’s economy. According to the advance estimate of the Bureau of Economic Analysis, the real Gross Domestic Product (GDP) dropped at an annual rate of 32.9 percent in the second quarter of 2020 the worst ever recorded in history.

The Labor Department reported that unemployment insurance claims totaled 17 million ending July 18, 2020.

In response to the alarming effects of the COVID-19, the Internal Revenue Service (IRS) had made some adjustments in Offer in Compromise (OIC) which took effect until July 15, 2020.

The IRS provided below Frequently Asked Questions on the OICs: 

Q. What about taxpayers trying to apply for an Offer in Compromise (OIC)?

Taxpayers may still submit an Offer in Compromise if paying the full amount will trigger a financial hardship on their end. The OIC Pre-Qualifier tool must be considered before submitting an offer. 

There are other payment options that can be explored: Installment Agreement and a temporary delay in the collection process. Taxpayers who are amenable to using the payment plans can do it via the IRS online application.

Sending mails to the IRS is being discouraged. However, if a taxpayer receives a returned mail from the US Postal Service, he or she should keep a copy of the returned offer and resubmit it once the IRS is back to accepting OICs.

Q. What is the status of Offer in Compromise payments? 

Taxpayers with pending or accepted offers are encouraged to continue making the required payments. Temporary relief is available for those affected by COVID-19.

Offers Under Investigation: 

If a taxpayer skipped payments between March 25 through July 15, 2020, while his or her application is still under investigation, the taxpayer must resume the payments after July 15, 2020. Once the offer has been accepted, the taxpayer’s offer will be amended, which will allow him or her to settle the missed payments.

Already Accepted Offers: 

If the taxpayer is still incapable of paying the skipped payments and also the agreed amount in their accepted offer because of COVID-19 hardship, he or she must contact the IRS through its phone number.

Q: What should I do if my OIC is under consideration and I received a request for documents, payments, or non-filed tax returns prior to the end of the suspension period (July 15, 2020)?

Taxpayers must provide the requested information to have their OICs approved even if the suspension period is over. Those who are unable to submit the documents or returns must contact the IRS employee found on the correspondence

The Offer in Compromise is an agreement between the IRS and the taxpayer that allows the latter to pay the tax debt for less than the amount owed. The OIC is usually offered to those taxpayers who are unlikely to pay the full amount and will experience more serious financial burden.

The goal of the OIC is to collect the amount at the earliest possible time. Those months of lockdowns and quarantines have obviously crippled a lot of businesses in all sectors and also the workforce, making it more difficult for some taxpayers to settle their tax debts.

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