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Recession changes IRS' tactics

Wednesday, Jan, 7
Posted 11 a.m. EDT

IRS wants to work with cash-strapped taxpayers

The tough economy has forced just about everyone to make some changes, including the tax collector.

IRS Commissioner Doug Shulman announced Tuesday that his agency is instituting "new protections to help people trying to meet their tax obligations. The IRS will do everything it can to help during these tough times."

That 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 financial problems you might be having and how they affect your tax obligations.

"We are taking concrete steps to work with taxpayers if they find themselves in difficult situations because of the economy," Shulman said via teleconference.

Shulman cited five ways the IRS will try to work with cash-strapped taxpayers.

1. IRS employees have been given greater authority to suspend collection actions in situations where taxpayers simply cannot pay because of financial emergencies. This action, said Shulman, should help those who recently lost a job or are facing significant medical bills.

2. The agency will be more flexible with taxpayers who miss an installment agreement payment. Usually in such instances, the IRS can cancel the agreement and demand you pay your full tax bill. But where a taxpayer can show legitimate financial reasons for a missed payment, the IRS will leave the agreement in place.

3. Similar latitude will be granted for individuals who have an offer in compromise, or OIC, deal with the IRS. With a compromise arrangement, you and the IRS agree on a payment amount that is less than your actual tax bill. Taxpayers who can't make their payments can contact the IRS office handling the offer for available options.

4. Another OIC issue often is a taxpayer's home equity. In the past, if you had sufficient equity in your residence, you couldn't qualify for a compromise offer. Now, however, home values in most regions are in flux and valuations are uncertain. So if home equity is the only reason an OIC is rejected, said Shulman, the IRS will take a second look at the offer.

5. Finally, the IRS will expedite levy releases on assets, such as bank accounts or wages, once a taxpayer has paid his or her back taxes. "We are going to get that done as soon as possible so they can make their bills," said Shulman.

The commissioner also emphasized that while the IRS is committed to helping financially struggling taxpayers, the changes in programs and administration are not free rides. "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."

But, added Shulman, in each case, it's critical for taxpayers to contact the IRS. "Don't just not pay," he said. "Get in touch with the IRS."

Get your daily tax tip: One of the best ways to make sure you meet your tax obligations and ensure that the amount the IRS gets is as low as possible is to get's Daily Tax Tip.

You can sign up to have a tip delivered to your e-mail inbox each weekday through April 15. These bite-size nuggets of tax goodness are chock-full of advice on tax preparation, tips for cutting your tax bill, plus tax tools and terms to help you through filing and beyond.

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-- Posted: Jan. 7, 2009

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