For the second straight year, the Internal Revenue Service is reaching out to folks in financial trouble. The agency is planning Saturday open houses where taxpayers can work out payment problems with IRS officials.
This special treatment is part of Commissioner Douglas Shulman's goal to let people know the IRS is concerned about those in financial distress. When you have 140 million individual tax returns, "you need to be continually looking at ways to serve people," Shulman said. "This effort continues my theme that we have to walk in taxpayer shoes. There are still a lot of people who are unemployed facing hardship."
Last year, the IRS gave its front-line employees the authority to be easier on people having difficulty paying their taxes because of the financial crisis. Depending on the circumstances, collection efforts were halted for taxpayers in financial trouble. In other cases, people with installment agreements for overdue tax debts were allowed to skip a payment or get monthly payments reduced.
This tax season, Shulman said, if individuals and small business owners bring all their information to an open house, they should be able to walk out with their tax issues resolved. The open houses will be staffed with IRS personnel from various departments, including examinations, collections and appeals. "Our goal is for people to walk out clean," Shulman said. "And by clean, I mean you walk out knowing what you owe, or if you need a settlement offer it's on the table. If you are in appeal, that is over. If you are trying to get an installment plan, you are done. This, frankly, is good for taxpayers and good for us. We want to wrap these things up and move on."
The first open houses will start Saturday. Check www.irs.gov for a full list of dates, times and locations.
Additionally, the IRS is relaxing its income requirement to qualify for an "offer in compromise," or OIC. This is an agreement between a taxpayer and the IRS that settles a person's debt for less than the full amount owed. IRS employees will be allowed to consider a taxpayer's current income and potential for future income when negotiating an OIC.
Under regular guidelines, the reduction in the tax debt is weighed against a taxpayer's earnings in prior years. "It's a big shift," Shulman said. "This will allow thousands more in the (OIC) program."
There is a caveat to this special treatment. If your economic situation changes, the IRS may revisit the offer in compromise.
If your current income doesn't provide an accurate analysis of what you may earn in the future, the IRS may require you to sign a future income collateral agreement. The agreement would specify at what income levels that action is triggered, and would also set a dollar limit. You will have to pay an agreed-upon percentage of your adjusted gross income. Taxpayers with this type of agreement are required to provide a Form 3439, Statement of Annual Income, every year.
If you already have an accepted OIC but your financial situation has changed, you should submit a proposal to renegotiate your agreement. It must be based on "doubt as to collectability" and should be submitted to the IRS unit monitoring your OIC.
There are other payment options if you have past-due tax debts, such as a monthly installment agreement. An OIC is considered only after these other options have been exhausted.
If you've been tempted to call one of the promoters who claim your tax debt can be reduced for pennies on the dollars, go to one of the Saturday open houses first -- or call the IRS. Don't pay thousands of dollars for something you may be able to work out with the IRS for free.
The IRS has created a new page on its Web site with numerous resources, including links to information on tax assistance. On the home page, search for "Tax Center to Assist Unemployed Taxpayers." Even if you aren't unemployed, the resources are helpful if you are having trouble paying your taxes.
I'll admit it's hard to link the word compassion with the IRS. But Shulman is on a mission to collect what the government is owed, through ways that minimize the trauma to those having trouble meeting their tax obligations.