There really may be a silver lining -- OK, silver-plated -- to our horrid economic situation. It's helped the IRS find a heart.
At a telephone press conference yesterday, IRS Commissioner Doug Shulman announced that his agency is committed to working with cash-strapped folks so that they can meet their federal tax obligations while just trying to survive in this crazy economy.
This latest IRS announcement comes just a few weeks after the IRS announced an expedited process to help remove tax liens from the homes of financially struggling owners.
Yep. You heard right. The IRS does feel your pain
"We recognize the economic realities. People are facing extraordinary challenges due to the economy," said Shulman. To that end, the commish presented an overview of what he called "concrete steps to work with taxpayers if they find themselves in difficult situations because of the economy."
Don't start doing the happy dance yet.
The IRS' new attitude doesn't mean you can quit paying your taxes. But it does mean that the IRS will be more flexible, and yes, more human, when it comes to problems you're having in trying to pay Uncle Sam.
The biggest beneficiaries of this new approach are likely to be folks who've never found themselves facing tax trouble before. "I've instructed all personnel to be sensitive to taxpayers, especially previously compliant taxpayers who are having a hard time for the first time paying the IRS," said Shulman.
He then cited five specific ways the IRS will work with taxpayers.
1. Postponement of Collection Actions
IRS employees have been given greater authority to suspend collection actions in certain hardship situations. This includes instances when someone has just lost a job, is relying solely on Social Security or is facing significant medical bills.
2. Added Flexibility for Missed Payments
The IRS will be more flexible with taxpayers who have been keeping current on an installment agreement but then miss a payment because of job loss or other financial hardship. When someone misses even one payment, the IRS usually cancels the agreement and demands full payment of the owed tax. But where a taxpayer can show legitimate financial reasons for the missed payment, the IRS will leave the agreement in place. Shulman said IRS may now allow a skipped payment or a reduced monthly payment amount without automatically suspending the plan.
3. Prevention of Offer in Compromise Defaults
The IRS will grant similar payment leeway to individuals who have an offer in compromise, or OIC, deal. In these arrangements, you and the IRS agree on a tax payment amount that is less than what you actually owe. Taxpayers who can't make their OIC payments can contact the IRS office handling the offer for available options that will keep them from defaulting on the agreement.
4. Additional Review for OIC Home Values
One obstacle to getting IRS sign-off on an OIC could be your home. If you have sufficient equity in your property, based in large part on your home's value, you might not be able to get an OIC. With the uncertainty in the housing market, Shulman said the IRS recognizes that the real-estate valuations used to assess ability to pay may not be accurate. So where there are questions about the accuracy of local real estate assessments, the IRS is creating a panel to provide a second review of the information to determine if accepting an offer is appropriate.
5. Expedited Levy Releases:
The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. "We are going to get that done as soon as possible so they can make their bills," said Shulman.
Taxpayers must step up, too: All these new programs and approaches and leniency are all well and good on the IRS' part, but some responsibility still lies with taxpayers. If you're having financial trouble and that's making it hard for you to pay your taxes, let the IRS know.
"Don't just not pay," Shulman said. "Get in touch with the IRS. We can't help if we don't know the situation."
Your best move is to file even if you can't pay all that you owe. Send what you can and then talk to the IRS about how to deal with the remainder. That way you'll avoid the failure-to-file penalty, which is much tougher than the failure to pay penalty.
And Shulman emphasized that while the IRS is committed to helping financially struggling taxpayers, no one will get a free ride. "If you can meet your obligations, we will expect you to do so," said Shulman. "But if you can't for legitimate reasons, we want to be especially sensitive in these tough economic times."
Cloud photo courtesy Viva la Hanza and Flickr/Creative Commons