IRS May Help Taxpayers Facing Financial Hardships

The IRS issued a statement saying that they are taking steps to help financially distressed taxpayers. Depending on the circumstances, taxpayers in hardship situations may be able to adjust payments for back taxes, avoid defaulting on payment agreements or possibly defer collection action.

In other words, for taxpayers who have lost their job, seen a significant decline in their income, been forced to close down their business – the IRS “may” delay collections or adjust payments for back taxes, avoid defaulting on payment agreements or possibly defer collection action.

The operative word here is “may.”  In any event, the American taxpaying public will need expert tax representation now more than ever to navigate these muddled waters.

See the IRS web site for economic downturn scenarios that have a possible tax impact.

If you believe you may have trouble paying your tax bill, know that it is critical to file your tax return even if you are unable to pay – so that you can avoid additional penalties.

What we tell our clients is that no matter how much is owed, if they enclose a check for $5 or $10 with the return and file it on time it cuts down on the failure to file penalty and it creates a record at IRS that says you actually filed on time and they have to post that $5 or $10 check to your account.

The IRS also reminds people that they may be able to provide assistance for people who owe taxes by offering the following:

* Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills. If an individual has recently encountered this type of financial problem, IRS assistors may be able to suspend collection without documentation to minimize burden on the taxpayer.

* Added Flexibility for Missed Payments: The IRS is allowing more flexibility for previously compliant individuals in existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. The IRS may allow a skipped payment or a reduced monthly payment amount without automatically suspending the Installment Agreement. Taxpayers in a difficult financial situation should contact the IRS.

* Additional Review for Offers in Compromise on Home Values: An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay may not be accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new second review of the information to determine if accepting an offer is appropriate.

* Prevention of Offer in Compromise Defaults: Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.

* 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. Taxpayers seeking expedited releases for levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.

If you are in trouble with the IRS, our specialized staff of tax attorneys, CPAs, EAs and tax professionals can help. Visit the Tax Resolution Services web site  for a free tax relief consultation or call us at 866-477-7762.  

More Tax Help, IRS News and Tax Relief Tips:

1. Nation’s Leading Tax Resolution Firm Saves Taxpayer Over $5 Million with IRS Offer in Compromise
2. Have You Filed Your Taxes? Consequences Include Increased Financial Liability and Imprisonment
3. What to Expect When Resolving Your Tax Debt: Road Map to Tax Resolution
4. Offer in Compromise: How to Get the Tax Help You Need Through an IRS Offer in Compromise
5. IRS Tax Relief For Last Minute Filers as April 15th Approaches

Tags: avoiding IRS penalties, Back Taxes, bank levy, defer IRS collection, failure to file, IRS help, Michael Rozbruch, Offer in Compromise, tax attorney, tax expert, tax help

This entry was posted on Sunday, January 11th, 2009 at 2:47 pm and is filed under Tax news and tips, Working with the IRS. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.