Can't Pay Taxes? Want Free E-File? The New IRS
IRS Debt Problems - What if You Can't Make Tax Payments?
The IRS knows that many Americans dread filing federal tax returns and that the 2009 filing season poses a problem for already financially distressed individuals. The new IRS attitude can be summed up in a statement by IRS Commissioner Doug Shulman, made in IR-2009-002: "We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today. We want to go the extra mile to help taxpayers, especially those who've done the right thing in the past and are facing unusual hardships."
How is the IRS Helping with Federal Return Filing & Tax Debt?
The IRS especially wants to help taxpayers who normally make tax payments on time but can't pay taxes in full this year due to financial difficulty. The IRS is being lenient in these ways:
- Flexibility with missed Installment Agreement payments. Taxpayers who have previously agreed to an Installment Agreement and have been making payments on time until recently may receive leniency if they miss a payment. Taxpayers in financial distress due to a lost job or other financial hardship may also be able to negotiate a reduced monthly payment.
- Considering Offers in Compromise despite a taxpayer's equity in real estate. Because home values on paper do not necessarily reflect reality in today's economic climate, the IRS may overlook a taxpayer's home equity as an asset that could be used to pay taxes in considering whether or not to accept an Offer in Compromise.
- Leniency with regard to Offer In Compromise payments. Taxpayers should contact the IRS office handling their case for information on how to avoid defaulting on an Offer in Compromise arrangement.
- Postponing collection actions.
- Expediting levy releases.
In addition to the leniency shown to those with tax debts, everyone can now e-file for free. Those with $56,000 or less in adjusted gross income in 2008 qualify to use IRS Free File. Anyone who makes too much to qualify for Free File can use Free File Fillable Tax Forms to e-file for free instead. In prior years, the fillable tax forms were not an option for higher income taxpayers. Where 70% of taxpayers were eligible for free e-filing in 2007, all taxpayers can e-file for free in 2008 through one of these features.
Can't Pay Taxes Right Now? Call to Discuss Options Regarding IRS Debt
IRS employees will be flexible this year due to the bad economy, but taxpayers must take the first step to request special treatment. The IRS will not automatically assume that any taxpayer cannot meet tax obligations. Taxpayers should contact the IRS if they need to make special arrangements to pay off debts. Additionally, taxpayers should not view this leniency as a way to get out of paying taxes. The IRS is going to work out ways to help taxpayers who are currently strapped for cash, but taxpayers will still ultimately have to pay their tax debts. Anyone who has received correspondence from the IRS, such as a delinquent tax notice, should call the phone number listed on the notice.
Taxpayers aren't on their own. The new and improved "friendlier" IRS is willing to talk to those in financial distress and possibly work out alternate arrangements. Lower income taxpayers may take advantage of the regular Free File program; higher income individuals may use the Free File Fillable Tax Forms feature. More information on both e-file programs and payment arrangements like the Offer in Compromise is available on the IRS website. To learn about the Free File program, read the article Free Federal Tax Return Filing; it discusses the benefits of using Free File as well as how to determine if you are using the legitimate IRS program.
Resources:
Internal Revenue Service website
Can't Pay Taxes? Call IRS About Tax Debt
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In Financial Distress: Work Out Payments with IRS
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