Note: The IRS conducts presentations via Phone Forums. These presentations are archived on the IRSVideos.gov website for individuals, small businesses and tax professionals. The links to all IRS phone forums are shown at the end of this phone forum transcript.

Q1. I have been asked to file returns for a taxpayer who has no assets, little income, and owes many years of taxes. After all tax returns past due are filed, can an OIC immediately submitted or should the OIC be filed after the returns are processed and notices are received by the taxpayer?

A. Taxpayers may submit, and the IRS will consider, an offer to compromise taxes due on returns which have been filed but have not yet been assessed. If the offer in compromise is received before the returns are pending or assessed, the offer will be returned.

Taxpayers must be up to date with estimated tax payments for the current year at the time the offer is filed and throughout the offer investigation. For individuals the amount of the estimated tax payment due is based on 100% of the prior year’s tax or 90% of the current year’s tax due at the time the offer in compromise is filed, whichever is less. To figure the current estimated tax due, see Publication 505, Tax Withholding and Estimated Tax, and Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ).

Q2. What are some other options if an OIC is rejected?

A. If an offer in compromise is rejected, the taxpayer has 30 days from the date of the rejection letter to file a formal appeal. If the taxpayer does not wish to appeal the rejection determination, they may speak with the offer investigator about possible alternative resolutions; such as an installment agreement. If the offer investigator is unable to assist the taxpayer with an alternative resolution, they will refer the taxpayer to the appropriate contact. See Publication 594, The IRS Collection Process, for more information about possible collection alternatives available to the taxpayer.

Q3. If a self-employed taxpayer submitted an OIC for several years, essentially compromising SE tax (minimal or no income tax), will the taxpayer be credited for social security and Medicare taxes for the compromised self employment taxes?

A. Yes, the taxpayer will receive credit for the amount reported on their tax return, whether collected or paid. In some instances, the IRS may determine that an adjustment to the assessed liabilities is in order and any changes to the original data will affect the initially reported Social Security and Medicare credits at that point.

However, if the offer has already been accepted, those adjustments cannot be made due to the contractual nature of the accepted OIC. Social Security and Medicare records would remain as originally reported.

Q4. If a contractor owes more than $75,000 for Form 941 taxes, including penalties and interest, would they be considered a good candidate for an OIC if they could submit $35,000 with their Form 656 and can show they have little or no equity in assets? Or would an installment agreement be a better option?

A. IRM 5.8.1.1 states: IRS will accept an offer in compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. It goes on to say, “In cases where an OIC appears to be a viable solution to a tax delinquency… The taxpayer will be responsible for initiating the first specific proposal for compromise.” The taxpayer must make an adequate compromise proposal consistent with their ability to pay.

They will be given the opportunity to increase the OIC amount if the reasonable collection potential is determined to be more than the amount offered. Offers will not be accepted if it is believed that the liability can be paid in full through an installment agreement extending through the remaining statutory period for collection, or other means of collection, unless special circumstances exist.

Q5. Is an OIC acceptable for previous payroll taxes due? If so, please provide an example of a case where an OIC would be accepted and the contractor would be allowed to go forward.

A. The type of tax is not the deciding factor on whether an offer is a solution to a tax debt.

An offer should be considered as a viable solution if it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential Offers will not be accepted if it is believed that the liability can be paid in full as a lump sum, installment payments extending through the remaining statutory period for collection, or other means of collection, unless special circumstances exist.

Each offer is investigated and a determination is made based its own merit and circumstances, no examples can be provided.

Q6. Provide examples and reference citations for research purposes, regarding situations that would qualify as a special circumstance for granting an OIC due to economic hardship, compelling public policy or equity considerations.

A. Unfortunately, no specific examples can be provided since each case is considered under its own merit and consideration of special circumstances. The citation for special circumstances for an offer in compromise is IRM 5.8.11, Effective Tax Administration. Within that IRM section, are examples and basis for application of special circumstances and effective tax administration procedures.

Q7. Should more than one check be submitted with the OIC if I’m not sure of the total amount that IRS will accept as an appropriate offer amount or the number of installments? Since some amount is required – should this be the minimum amount we believe the IRS will accept?

A. If one makes a cash offer 20% of the total amount offered should be submitted. If the offer will be paid in installment payments, one must submit the initial payment and continue making the proposed payments throughout the investigation. A single payment for the total amount of the offer is not required. The taxpayer is responsible for initiating the first specific proposal for compromise and the offered amount should reflect their calculated reasonable collection potential.

If the final investigation reflects the taxpayer could pay more, the taxpayer will be given the opportunity to increase the offer amount. The full amount of the offer would then be due at the time of acceptance, depending on the agreed terms.

Q8. Are there guidelines for the dollar amount to be submitted for an OIC? What happens to the down payment submitted if the IRS determines that the amount the taxpayer sent in did not meet the required amount?

A. If a cash offer is sent, it must include 20% of the total amount offered. If the offered amount is to be paid in installment payments, the initial payment must be included with the offer and the taxpayer must continue making the proposed payments throughout the investigation. The taxpayer must make an adequate compromise proposal consistent their calculated reasonable collection potential. All payments are applied to the liability(s) and are nonrefundable.

Q9. Is there a minimum dollar limit for which the IRS will not consider an OIC? If so, what is dollar amount for which IRS will consider an OIC?

A. The IRS does not have a minimum or maximum dollar limit for to qualify for an OIC. There is no limit on the amount of the liability. However, an offer cannot be considered if the offered amount is zero. The taxpayer must make an adequate compromise proposal consistent with their calculated reasonable collection potential.

Q10. Is credit card debt considered a deductible expense when calculating personal deductible expenses for an OIC? Also, can payments and fees paid to a debt management company considered a deductible expense?

A. Credit card debt is an unsecured debt. Credit card debt is not an allowable expense for purposes of determining the reasonable collection potential for an OIC. Generally, payments and fees paid to a debt management company will not be considered as an allowable expense.

Q11. Please clarify that if a taxpayer obtains a loan to fund an OIC, the monthly loan payment would indeed qualify as an allowable expense for purposes of calculating the RCP in the income and expense section of the analysis.

A. Generally, if the loan is secured to fund the OIC and the taxpayer provides documentation of that fact, the loan payments would be allowed as an expense when calculating the RCP.

Q12. Does a taxpayer who currently has a wage garnishment qualify for an OIC? If the OIC denied, what happens to the payment submitted?

A. A wage levy does not prevent a taxpayer from submitting an OIC. If the OIC is rejected, all payments received during the investigation of the OIC will be applied to the liability.

Q13. Explain the comparison made of when tax liens are removed in the PPIA process vs. the OIC process. When, exactly, are the tax liens removed during the OIC process?

A. For an OIC, the Notice of Federal Tax Lien is released within 30 days of meeting the terms of the accepted OIC or the liability is paid in full, whichever comes first. For a PPIA, the lien is not released until the statute of limitations expires or the liability is paid in full, whichever is earlier.

Q14. What should a taxpayer do when there is a wage garnishment for tax due and wants to make payments on the amount offered in the OIC, but cannot afford to make both payments?

A. There is no requirement for the release of a levy that was served prior to the offer submission. The taxpayer’s circumstances should be considered when making a determination to release a levy or keep it in place while the offer is pending.

Q15. Is it true that when an OIC is accepted and paid in full, the IRS keeps refunds claimed on Form 1040 for 10 years following when the OIC was paid?

A. The IRS will keep any refund including interest due the taxpayer because of overpayment of any tax or other liability, for tax periods extending through the calendar year in which the IRS accepts the offer.

Q16. Since the amount acceptable for an OIC is the net value of current assets plus the income potential of a period of time (48 months), does this also mean that it is expected that the only way to make that offer is to be able to borrow the amount of the income potential from a source without collateral? Wouldn’t the funds available to cover the income potential be considered part of the current net assets?

A. (1) The taxpayers’ offer (absent special circumstances) must equal Reasonable Collection Potential, which includes equity in assets and future income value. IRS does not advise the taxpayer whether they should borrow the funds or what assets should be pledged as collateral. In certain instances, the offer amount will be provided by third parties who are willing to loan or gift the amount needed to fund the offer and not require collateral.

When a taxpayer is unable to fund a cash offer, the offer terms may also provide for payment of equity in assets over a period of time by submitting deferred payments.

(2)The equity in assets does not include future income potential.
As an example, the taxpayer has been making payments from their past income on a mortgage over a number of years. These payments have increased the equity in that asset. Future payments would also increase that equity, so rather than determining the possible future equity based on the payments, a calculation based on necessary living expenses is used to determine the future income value.

Q17. If an individual cannot pay his debt due to financial capacity (no assets and income is insufficient), should he request an OIC?

A. IRS will accept an offer in compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. Generally, an offer amount must equal or exceed a taxpayer’s reasonable collection potential in order to be acceptable.

The exceptions are when special circumstances have been proven and warrant acceptance for less than the amount of the calculated RCP.

Q18. Explain the requirements for making tax deposits while applying for or when an OIC is accepted. Does this also include the trust fund portion of withholding taxes? Also, if an OIC is accepted, and then required monthly payments stop, is the OIC cancelled? If so, how can the OIC be reinstated or continued?

A. Taxpayers must remain in compliance while the offer is being considered. An untimely federal tax deposit made after assignment to an employee investigating the offer and during the investigation will result in a return of the offer.

It is necessary for the taxpayer to be current with federal tax deposits the quarter that the offer was submitted and remain in compliance with the filing and deposit requirements during the offer process. Regarding default and reinstatement see Q&A 22.

Q19. Is it true that there is a process of audit reconsideration when there is doubt of liability for a tax return? How is this different than an OIC or collection due process hearing? Provide statutory/regulatory citations/procedures.

A. In addition to a doubt as to collectability OIC there is a doubt as to liability OIC, Form 656-L. IRC Section § 7122 grants broad authority to the Secretary of the Treasury to compromise tax liabilities.

Treasury Regulation § 301.7122-1, is the authority to compromise a liability on any one of three grounds: Doubt as to collectibality, doubt as to liability, or to promote effective tax administration. A collection due process hearing is a procedure to allow consideration of relief from a collection action, such as a proposed levy or filing of a federal tax lien.

The documentation for a doubt as to liability OIC depends on the type of liability requesting to be compromised. This list below is generally the type of documentation requested:

copies of examination reports and substantiation for the examination finding(s) which the taxpayer believes is incorrect
original tax returns if the taxpayer disputes a Substitute For Return assessment
documentation to support reasonable cause claims for penalty offers

Q20. Explain the ETA basis of requesting an Offer In Compromise.

A. The ETA offer allows for situations where tax liabilities should not be collected even though:

The tax is legally owed, and
The taxpayer has the ability to pay it in full

No compromise to promote ETA may be entered into if compromise of the liability would undermine compliance by taxpayers with the tax laws. An ETA offer can only be considered when IRS has determined that the taxpayer does not qualify for consideration under doubt as to collectability or doubt as to liability.

Q21. Is there anyway to have the interest/penalty forgiven due to economic hardship so the taxes due can be paid?

A. In the interest of ETA and equity, abatement of penalties based on reasonable cause must be made in a consistent manner and should conform to reasonable cause considerations specified in the Internal Revenue Code, Treasury Regulations, Policy Statements (P-2-7 and P-1-18), and IRM 20.1.

Reasonable cause relief is generally granted when the taxpayer exercises ordinary business care and prudence in determining their tax obligations but is unable to comply with those obligations due to circumstances beyond their control. Each case must be judged individually based on the facts and circumstances. Form 843 may be used to request the abatement. There are no provisions for interest forgiveness due to economic hardship.

Q22. Is there any way to have a defaulted OIC reinstated other than reapplying? Are there any other options for a defaulted OIC?

A. Once an offer has been identified as a potential default, the IRS will allow the taxpayer an opportunity to comply with the terms of the offer before defaulting. Once the offer is defaulted, the taxpayer must submit a new OIC and new Form 656.

Q23. IRM, 5.8.9.4(1)(a) permits modifications of an existing OIC. The procedures outlined indicate that the taxpayer should make the proposed payments in lieu of the original agreed monthly payments during the review/approval process of the new OIC terms. If a requested modification has been denied, what happens to the original OIC? The denial pattern letter (Exhibit 5.8.9-3 Pattern Letter 1607(P)) does not address a “catch up” situation for the shortage of payments made while the modification was being considered.

A. If the taxpayer’s proposal is denied and the terms of the original accepted OIC are not met, the OIC will be defaulted.

Q24. (2)How then can a recommendation be made to deny/default an accepted offer, requiring full “catch up” of the terms of the offer, when the IRM permits the taxpayer to make a proposal and live up to the terms of the proposal during the investigation, based upon a compliance issue in a non related entity?

A. An OIC that has been accepted for 1040 liabilities will not be defaulted because of a delinquency of the closely held corporation. However, once the taxpayer submits a proposal for an offer on an accepted offer and the new investigation determines the closely held corporation is not current with filing or payment requirements then the IRS has the latitude to deny the taxpayer’s proposal.

Q25. Are there any nonprofit organizations that help people with offer in compromise?

A. Low Income Taxpayer Clinic represent low income taxpayers before the IRS in audit, appeals, and collection issues, for free or for a nominal charge. There are LITCs in all states, and each has its own individual Low Income Taxpayer Clinic webpage.

However, we do not recommend using them unless it is an absolute necessity, as the speed, accuracy and quality of results is not as good as you would have by using a professional IRS tax attorney.

Some content taken from the IRS national phone forum, listed here

• IRSVideos.gov Individual Phone Forum
• IRSVideos.gov Small Business Phone Forum
• IRSVideos.gov Tax Professional Phone Forum

I hope you found this IRS Q&A on Offers in compromise helpful.

Until next time,

Jeff Fouts, Tax Attorney

Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.

I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff of tax specialists.

You can put off your tax problem, or put us to work on your IRS issues.

Related posts:

1. IRS Collection Process: Offers in Compromise
2. IRS Offer in Compromise Tax Settlement Help by Tax Attorney
3. How To Get Your Offer in Compromise Approved by the IRS

How Does an Offer in Compromise Work?

Basically, the IRS determines what percentage of your outstanding tax liability it can reasonably collect in the next 2 years. This is termed the “reasonable collection potential.” In order to qualify and successfully retain an IRS Offer in Compromise, you agree to:

• Pay the full amount of the proposed offer stated in the Offer in Compromise.
• File and pay your taxes on time for the next 5 years.
• Allow the IRS to keep any payments, refunds, and credits that were applied to your tax debts prior to the submission of your Offer in Compromise.
• Allow the IRS to keep any and all tax refunds you would have received during the calendar year your Offer in Compromise is approved.

Can I Prepare My Own Offer in Compromise?

Yes you can. This is not recommended, however. In my 18 years as a tax lawyer my experience is that the IRS is a gigantic bureaucracy that is unafraid to use its power when necessary. The amount of documentation required is extensive, and the experience of how and what information to submit is critical. That’s where a proven CPA and Tax Attorney is a worthy investment. However, if you do you want to file an OIC yourself, please do the following in order to maximize your chances of approval:

• Prepare IRS Form 433A and Form 656.
• Prepare Form 433B in addition to Forms 433A and 656 if you are self-employed.
• Prepare a document detailing the reasons you feel an Offer in Compromise is necessary.
• Carefully prepare all materials
• Present your materials and back-up information in a clear and logical format

An Offer in Compromise takes one to two years to complete, and even the slightest deviation in paperwork can delay the process even further. Additionally, the officer assigned to your case may request additional documentation in order to make an accurate determination regarding your request.

The Harsh Realities of Having Your Offer in Compromise Approved

Many companies make exaggerated, and sometimes just downright false, claims that they can help you settle your tax liability for just a few cents on the dollar. While this is technically possible, the chances of actually having your self submitted Offer in Compromise approved are pretty low. The IRS approved 16% of the total offers it received in 2004, accounting for a total of 19,546 offers. During the first five months of 2010, the IRS accepted 24% of all offers. In order to maximize the chance of approval, the assistance of a Tax Attorney with an extensive track record of successful IRS compromise offers is recommended.

Until next time,

Jeff Fouts, Tax Attorney

Here’s a bio: I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.

I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. I deal directly with my clients and have a small, tireless staff of tax specialists.

You can put off your tax problem, or put us to work.

Related posts:

1. IRS Offer in Compromise Tax Settlement Help by Tax Attorney
2. IRS Tax Problems: Jail or Offer in Compromise?

If you have a tax problem, you don’t have to repeat this mistake. Many people don’t realize that you can often negotiate a lower tax bill with the IRS using what is called an IRS Offer In Compromise or OIC. With an IRS offer in compromise, you can lower your overall tax debt and make monthly payments that let you not only avoid jail time, but wage garnishments and IRS levy’s as well.

Here’s an example of what not to do and more on the IRS Offer in Compromise:

(KMOV) Channel 4 St. Louis, MO August 21, 2011 — The United States Attorney’s Office announced today that Marilyn Francel pled guilty to tax evasion involving joint income tax returns filed with her husband for the years 2003-2006. In papers filed with the court, Francel agreed that she was the practice manager of her husband’s plastic surgery medical practice – Thomas J. Francel M.D. Plastic Surgery P.C.

The practice offered discounts for non-insured cosmetic surgeries when the patient paid by cash or cashier’s check. These discounted payments were recorded in a green ledger book maintained by the office business manager and not in the normal financial records of the practice.

Francel agreed that these receipts were not deposited into the business bank account for the practice. Each count carries a maximum penalty of five years in prison and/or fines up to $250,000. In determining the actual sentences, a judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges. The parties recommended to the court a range under the Sentencing Guidelines in which a sentence of up to 12 months in prison could be imposed.

Link to full article

Following is a summary of an IRS Offer in Compromise

The IRS’ Offer in Compromise program allows taxpayers to settle their tax debt

• It settles your tax liability for less than the full amount owed.
• It is possible to pay "Pennies on the Dollar Owed' in taxes (but don’t be suckered in by tax services that promise the moon, especially the firms that may suggest an OIC amount before even reviewing your case in detail!).
• In order to properly submit an Offer in Compromise you must first complete several special IRS forms.

You must be careful

• To increase the chances of a successful IRS ruling you should hire a tax attorney with extensive knowledge of the IRS’ procedures.
• Why? Because the key is to determine the least amount that the IRS will accept from you.
• Let a tax professional prepare the documents for you – quickly and affordably.
• If your Offer is not submitted correctly it will be rejected, or you may be required to pay more than is necessary.

View settlements I’ve obtained for my clients over the last 18 years.

With an IRS offer in compromise, you not only get a fresh start with the IRS, it’s one of the best ways to avoid jail time.

Until Next Time,

Jeff Fouts, Tax Attorney

Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.

I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff of tax specialists.

You can put off your tax problem, or put us to work for you.

Related posts:

1. IRS Offer in Compromise Tax Settlement Help by Tax Attorney

Get the facts about an IRS Offer in Compromise

This is a guest post from Regina King

You may have heard that in an IRS Offer in Compromise you can “settle your IRS tax debt for pennies on the dollar” (an Offer in Compromise should not to be confused with general debt relief). This is true in some cases but be wary of any firm that over emphasizes your potential savings without having thoroughly reviewed your case. A review includes reviewing all your tax records.

Here are some facts about an IRS Offer in Compromise.

• As of the 2010 Fiscal year the IRS approved 24% of all Offer in Compromise submissions (source: National Taxpayer Advocate Report to Congress Fiscal Year 2011 Objectives).
• To qualify you must meet strict qualifications.
• You have to make an offer to the IRS to settle your debt. After this, the IRS will assess your financial situation and will take into consideration your assets, liabilities and disposable income. After reviewing these factors they issue their ruling.

The aim behind an Offer in Compromise, sometimes abbreviated as OIC, is to increase tax receipts (money coming in to the IRS) by making it easier to you to come forward to the IRS and pay what you can afford.

Offer in Compromise Requirements and Guidelines as stated by the IRS

According to the IRS, you may submit an Offer in Compromise if you meet one of the following requirements.

• Doubt as to Liability – You can show doubt that the assessed tax amount is correct.

• Doubt as to Collectibility – You must show there is no possibility that you can pay the amount due, or that you are willing to offer the amount of money your financial data shows you should be able to pay. This is the most common method followed by people when filing for an Offer in Compromise. The calculation methods are quite tricky, and could mean the difference between a settlement Offer which is accepted and one that’s rejected.

• Effective Tax Administration – The debtor may have the potential to pay back the full amount of taxes owed but exceptional circumstances prevent them from doing so and would create a financial hardship (such as with the disabled or elderly who can’t generate money).

Filing For an Offer in Compromise Settlement

To file an Offer in Compromise settlement, you need to submit a number of forms that vary with your particular situation, such as:

• IRS Form 656 – Offer in Compromise – Using this form the taxpayer offers the IRS a settlement amount money in exchange for the IRS not pursuing the remainder of the tax debt.

• IRS Form 656-A – Income Certification for Offer in Compromise Application Fee and Payment- If you have a low level of income you may not be required to submit an application fee for the OIC .

• IRS Form 433-A – Collection Information Statement for Wage Earners and Self-Employed This form will help the IRS understand your financial situation more closely and allows the IRS to determine if they can collect back taxes from you. This is one of the most important documents in a settlement case. The Form 433-A, along with the complete settlement packet and proposal we create for our clients, is the foundation of your case, and if done incorrectly it can torpedo any chances you had of getting your settlement offer accepted.

• IRS Form 443-B – Collection Information Statement for Businesses – This form is similar to form 433-A, but for businesses. You are required to file this form if you want to include your business taxes in an OIC. The same comments apply to the 433-B that I mentioned for the 433-A, except more so. The settlement packet and proposal for a client who has a business or who owes business taxes is very, very sensitive and must be done right the first time. Business financial statements and proposals are best not left to folks who aren’t well-versed in them.

Other things to know about submitting an offer in compromise

• There is a $150 application fee to submit your offer
• In a lump sum payment offer you must pay the IRS back in five payments or less
• In a short term periodic payment offer you can take up to 24 months to pay the offered amount.
• In a deferred periodic payment offer you must pay over the remaining statutory period for collecting the tax.

Why You Should Use a licensed tax professional for an Offer in Compromise

The IRS rejected 76% of all Offer in Compromise submissions during the last fiscal year. Those are tough odds. An experienced tax attorney can offer you the protection of attorney-client privilege, plus years of experience in working with the IRS. They use tools to avoid errors that can harm your chances, and their knowhow to maximizes the chances of your Offer in Compromise being accepted. This includes understanding changes to rules and procedures that the IRS makes from year-to-year, or even month-to-month sometimes. The reality is you need true legal expertise to help you with your IRS problem just as you need a medical specialist to help you if you have a heart problem.

The good news is even if you can’t qualify for a reduced tax bill with an Offer in Compromise, many people still qualify for other good options, like affordable monthly IRS payments. The goal is to allow you to resolve your tax issues and move on with your life.

No related posts.

But recently, the IRS seems to have realized that they can only bleed someone for so long. If they keep taking their pound of flesh, they are eventually left with taxpayers who have nothing else to give. And this is the case even more so now than ever before because of the economic turmoil facing the world.

So, the IRS has “graciously” conceded to “additional steps to help people who owe back taxes”… in particular, for those who are facing “unusual hardships”. . Here are some of those additional steps:

The IRS increased the authority of its employees to suspend collection when there’s a hardship situation. This includes:

• Job loss
• Social security or welfare recipients
• Significant medial bills

Taxpayers who have difficulty making payments (because of a number of reasons including job loss) may skip a payment or pay reduced payments.

Also, the Offer in Compromise has been augmented to allow for drops in home values (which once may have created difficulty in getting the IRS to agree to an OIC). And those who have an OIC agreement but are at risk of default now have options to avoid default.

Lastly, the IRS is speeding up its delivery of levy releases by reducing the requirements that taxpayers must meet when requesting a levy release.

In some ways, it’s nice to see the IRS finally recognizing that it needs to help people who want to pay their taxes but cannot. After all, it costs taxpayers a lot of money to punish taxpayers who aren’t paying their taxes… and law-abiding taxpayers who simply are not able to pay should not face dire consequences, particularly in this economy.

But let’s be realistic: While it’s nice to see the IRS doing something about it, the only reason they’re doing it is because they know that the pound of flesh is running out. They know that they can’t get more money out of taxpayers in the traditional way, and with the economy making it more and more difficult, they have developed “creative financing” to make it happen.

Tentative kudos to the IRS.

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