IRS To Ease Up On Squeezing Financially Stressed Taxpayers Owing Back Taxes

The Sacramento Bee reports:

• Can't pay your federal taxes? The IRS wants to help. Acknowledging the "difficult economic times," officials said Tuesday they're relaxing some rules to help financially stressed taxpayers dealing with job losses and other economic uncertainty.

Among the measures announced Tuesday:

• IRS employees now have "greater authority to suspend collection actions in cases where taxpayers simply cannot pay," said [IRS commissioner Doug] Shulman.

• Taxpayers may be allowed to skip a payment or obtain a reduced monthly payment, without automatically suspending their current installment agreement for paying back taxes. Previously, if a payment was missed or late, those agreements would be voided, with the full amount due.

• Given the steep drop in home values, the IRS has set up a unit to handle cases where a home's value has stymied efforts to reach an "offer in compromise."(1) A so-called OIC agreement allows a taxpayer to settle a tax debt for less than what's owed. "Anytime home equity is a roadblock to an OIC, we're going to take a second look," Shulman said. Also, taxpayers who are already in an OIC but cannot make their payments for hardship reasons will be offered options to avoid default.

• Taxpayers whose wages or bank accounts are being garnished for delinquent back taxes can request a hardship release. The IRS says it will work with taxpayers to speed up so-called "levy releases."(2)

For more, see IRS relaxes some rules for those in financial bind.

Go here for more on:

• IRS Offer-In-Compromise - see IRS Form 656 & Instructions (44 pages - 3.3 MB);
• IRS Payment Plans, Installment Agreements - see IRS Form 9465),
• The IRS Collection Process - IRS Publication 594 .

(1) An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. For an IRS advisory warning taxpayers to beware of promoters’ claims that tax debts can be settled for “pennies on the dollar,” see IR-2004-17: Check Carefully Before Applying for Offers in Compromise.

(2) A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt. Go here for more on IRS tax levies.