For the IRS, a Season of Kindness
The IRS is promising to be kinder in 2009. They say that agents will have more freedom to suspend collections in those cases where people who owe back taxes are unable to pay. That doesn't mean they won't have to pay eventually, just that the IRS won't keep harassing you if you don't have the ability to repay what you owe at the present time. The guidelines issued to agents include cases where the taxpayer is facing serious illness, relies solely on social security or welfare, or have lost their jobs.
The IRS will also let some people who have already entered into payment agreements for past due taxes to continue on in their repayment programs even if they need to send in a reduced payment or skip a payment due to economic hardship. This doesn't mean that everyone in a tax payment program can skip a payment with impunity, however. Agents will want some evidence of your financial distress such as proof that you lost your job. The IRS says if you face difficulty in meeting your obligations, you should contact them before you miss a payment to discuss it with an agent. Missing a payment and then waiting for the IRS to catch up with you is not going to put the agent in a forgiving mood, and since the allowances are at the agent's discretion, you want the agent to see that you are being upfront and forthcoming about the situation.
The third compromise the IRS may be willing to make at this time is loosening the standards for reducing the principle amount owed on back taxes. These arrangements are known as "offers in compromise" and usually require that any equity in your home be considered and used in the repayment. However, since many homes have fallen in value and continue to lose value every month, the IRS may be willing to lighten up on using every bit of available equity to repay your back taxes. Again, this will depend upon your ability to convince the agent that your particular situation merits such an allowance.
The bottom line is that the IRS has instructed its agents to consider the current economic climate and the individual situation of the taxpayer when collecting past due amounts. If you have lost your job or face other severe financial distress that affects your ability to repay your past due taxes, contact the IRS and see if you can rework your current deal. This does not mean that those with current tax liabilities will be allowed to let them become past due without penalty. If you have the wherewithal to do it, the best course of action is to get these debts paid and out of the way so you can move on with your life.
Author: Brad Sylvester
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