A Kinder, Gentler IRS

January 16, 2009
Special Feature

Recognizing that many taxpayers are facing economic hardships, the IRS recently announced that it would be more lenient to those who are unable to pay what they owe. In making the announcement, IRS Commissioner Doug Shulman made it clear that, while the agency recognized that taxpayers may be in need of some flexibility with regard to their tax payments, it also intended to enforce the tax laws.

Recognizing that many taxpayers are facing economic hardships, the IRS recently announced that it would be more lenient to those who are unable to pay what they owe. In making the announcement, IRS Commissioner Doug Shulman made it clear that, while the agency recognized that taxpayers may be in need of some flexibility with regard to their tax payments, it also intended to enforce the tax laws.

The promised flexibility will come in several forms. Perhaps one of the most welcome is giving more leeway to IRS employees to suspend collection activities if a taxpayer has recently lost a job, is facing mounting medical costs, or relies solely on Social Security benefits for income. Although the tax debt will not be erased, the IRS will suspend collection notices and phone calls, as well as levies, seizures, and penalties.

Taxpayers who are paying back taxes under an installment agreement with the IRS will be able to miss at least one payment or get a reduced monthly payment without automatically suspending the agreement. In the past, missing a payment meant the full amount of back taxes would come due immediately. The IRS also plans to widen eligibility for its “offer in compromise” program, which allows some taxpayers to settle with the agency for less than the taxes owed.

Commissioner Shulman stressed that the first step for taxpayers in financial trouble is to contact the IRS (800-829-1040). The agency is willing to work with taxpayers who seek help and show that they are in tough financial straits, he said, but will not show any leniency to those who ignore collection notices or fail to file tax returns.