The IRS has come out with some new softening approaches on dealing with the new hardships that are hitting the taxpayer in the wallet. Here is what you can now expect.
Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. The IRS is just starting the program this year. This includes cases 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. Documentation is needed to prove these situations.
Added Flexibility for Missed Payments: The IRS is now allowing more flexibility for previously compliant individuals in existing Installment Agreements who have a tough time 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 a tax professional to help with their situation.
Additional Review for Offers in Compromise on Home Values: An Offer in Compromise, an agreement between a taxpayer and the IRS that settles the taxpayers tax bill for less than the full amount owed, may be an 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.
IRS seems to be working hard to help taxpayers but only time will tell.