Recently, in an attempt to resolve a dispute with the IRS before taking it to Tax Court, I met with an IRS auditor who had already slammed my new client with an additional $36,000 in tax interest and penalty by disallowing $90,000 of business deductions he claimed for his little company. My mission: persuade the auditor that many, most, or all of the deductions she had disallowed were legitimate, and that she should which should be recognized as legitimate.

Policy Changes Which Affect Everyone Revealed in Conversation About One Taxpayer

In the course of talking about my taxpayer’s business and deductions, we discussed more generally tax rules and policy. And in that part of the conversation, this auditor told me that starting now, more and more audits will involve multi-year examinations (what many of us call a “tax audit,” the IRS calls an “examination” — audit, examination, both words refer to the same thing).

So, for example, three years ago, a taxpayer might have been audited (or “examined”) for tax year 2005, now, it is much more likely that if the IRS initiates an audit, the audit will involve not just 2005, but also ‘06, and ’07.

IRS Uses Old TV Commercial Logic: “How Do We Do it? Volume!”

Why? Simple: it’s cheaper by the dozen! Three years in one audit costs the IRS less than doing only one year.

In fact, this auditor explained, doing multi-year audits has always been the official policy, but often it was not carefully supervised by the layers of internal management at the IRS. But now that the federal government needs money severely, the IRS is looking to get as much of a bang for its audit buck as it can.

Happy(er) Ending for Client

Meanwhile, over the course of 6 hours or so, I persuaded the this auditor to recognize more than half of the disallowed expenses as being legitimate, resulting in reducing the additional tax, interest and penalty from more than $36,000 down to about $6,000. The taxpayer considered that a very good result.

And, a Word to the Wise Taxpayer

And, so, a “take-away” for everyone else, be aware: multi-year audits are on the rise. One way to start being ready if you become a target of audit is to keep and have good records. It may be a great time to review your record-keeping system, or to develop one if you don’t have one!

This is obvious but, with all the dread, resentment, and busywork that frequently comes along with the chore and expense of preparing tax returns and paying taxes, it is all too often overlooked:

if you’re paying taxes it means you made money.

Not owing (and so, paying) taxes generally means you aren’t making money. And that’s worse. (Let’s leave aside, for the moment, the issues surrounding “tax haven” countries like Leichtenstein, the Caymen Islands, Andorra, Monaco, etc., where we’ve been reading in the news recently that profitable companies avoid taxes through foreign subsidiaries incorporated in one of these offshore places).

It is a where-there’s-smoke-there’s-fire causal connection (or putting it into achievement test comparison: Income taxes are to making money as smoke is to fire (and again, following the metaphor, we leave aside the smokeless fires of off-shore tax havens for the moment).

The basic reality is, again, if your paying taxes, you’re making money, and that’s a good thing. (Thank you, Martha Stewart.)

~~~~~

Post Script:  At risk of blowing a punch line (not that this is funny), this paying-taxes-because-you’re-making-money-and-that’s-a-good-thing message makes me think to mention that I recently started a second blog, on a completely different topic, which is relevant here:  the other blog is called “Marketing and PR Lab” and, instead of discussing law or the government or taxes, it instead focuses on ways of improving one’s business and so, income, by improving your marketing methods and getting known.

So as you think of ways to have the “smoke and fire” problem described above, that is: “I have to pay taxes, Dang! But that means I made money — Great!” you might want to go to http://marketingandprlab.com to see if there are things there that can push your business and income-earning forward, or leave a comment to share your experiences, or both.

We can’t be fretting over Internal Revenue Code 6662 (the accuracy-related penalties, 20%, 40% depending on how inaccurate your tax return might be found to be) all the time.

There are alternatives. To be especially self-punishing, one look at § 6672 (the “Trust Fund Recovery Penalty,” formerly known as the “100% penalty” and think “oh how lucky I am to be only exposed to liability under § 6662 and not § 6672).

Better yet, and less punishing, just think about something else entirely.

For example, one timeless, but all to often overlooked alternative, there’s Miles Davis.

Below is video of a part of a concert at Montreaux, in 1973.

In this clip, Miles is in his late 60′s/early 70′s period which critics and some fans seemed to love (or loved) to hate. One theory: they are (or were)  apparently stuck in the 50′s when he did those great recordings with the quintet, Kind of Blue and Round About Midnight, etc. (not a bad place to get stuck, but now 40 years later some might argue that the late 60′s/early 70′s electric Miles is still ahead of his time).

So, below is the clip….

One has to wonder if the House Ways and Means Committee’s subcommittee on oversight got it right when it told reporters that it could not legally release the names of the companies who received bailout money while owing back taxes, two of which owe more than $100 million each. (See Associated Press article, “Some Getting Bailout Cash Owe Millions In Back Taxes,” in the New York Times on 3/20/2009 A19 col. 6.)

Ordinarily, a taxpayer’s tax information, whether it is an individual or a business, is treated as very private, very secret. In fact, IRS employees can be, and are, fired, criminally charged, convicted, and sentenced for the Unauthorized Inspection of Tax Return Information or Accessing of Tax Account Information.

But, when a taxpayer is late in paying a tax bill, these super-strong privacy rules don’t fully apply anymore.

One of the several extraordinarily powerful tools at the IRS’s disposal for protecting its claim on unpaid taxes and ultimately compelling payment, even from the most unwilling and uncooperative of debtors, is to publicly file a Notice of Federal Tax Lien.

Notices of Federal Tax Lien are filed with public recording authorities – where deeds, liens and UCC documents are filed – all over the country. In many places, that recording authority is the county clerk. In New York City it is the office of the City Register.

Once a Notice of Federal Tax Lien is filed, the unpaid tax debt becomes public information. Anyone can know that a taxpayer has an IRS back tax debt claim against him or her, or, in the case of companies owing north of $100 Million, it. Also, the previously confidential debt shows up on credit reports and public record searches.

And the IRS is not shy about using this tool: it files lots of Notices of Federal Tax Lien. For example, in the last 30 days, in Manhattan alone, the IRS filed 601. The filings for all five boroughs were almost 1900. Based on this, in New York City, the IRS files an average of 89 liens every business day.

While the IRS’s internal procedures manual suggests filing a lien when the past due tax reaches $5,000 or more, the IRS will sometimes file liens on amounts due which are much smaller. Just a month ago, in mid-February, the IRS filed a Notice of Federal Tax Lien against a taxpayer where the past due amount owed is $41.06. This tax was assessed only four months earlier, in October, 2008.

You, me, anyone can now know all about this taxpayer who owes $41.06: that it is a company not a person, its name, its street address (in midtown Manhattan), when the tax debt was assessed and when the lien was filed.

Do you think the IRS might have exercised the same power to publicly file a lien on a $100 million debt, since it did not hesitate to do so on a debt of $41.06?

On the other end of the spectrum, public filings allow us to know that Tiffany and Company – yes, the blue box, “Breakfast at” and Audrey Hepburn people – had a $3,723,680.76 federal tax lien filed against it in August, 2008, and that the lien was released three months later, in November 2008.

If the IRS exercised its discretion to publicly file a Notice of Federal Tax Lien on these bailed-out $100 Million tax debtors, then the House Subcommittee’s position that it is legally barred from revealing their identities is mistaken – the horse is already out of the barn, as President Obama recently said. (Unless the TARP bill or other legislation created some new and additional tax debtor privacy provision, though this seems unlikely, and would be difficult to square with pre-existing public records.)

Considering the size of the tax debts involved here (well over $41.06; well over $5,000), it would seem, without knowing more, that the IRS would likely be quick to file Notices of Federal Tax Lien to help secure it’s interest in collecting these hundreds of millions in unpaid tax. (“Woulda-coulda-shoulda” as Hillary Clinton said, in a different context, a decade ago.)

So, the questions now should be:

• Did the IRS file Notices of Federal Tax Lien on these tax debtor companies which received bailout cash?

• If yes, what law prevents the House subcommittee from releasing these companies’ names? (Probably no law.)

• And, if no law prevents the releasing of these names, how about telling us, in another bold stroke toward “transparency”?

• Finally, if the IRS has opted not to file Notices of Federal Tax Lien on these companies, why not?

In the wake of the unravelling of uber-Ponzi schemer Bernard Madoff’s scam, the IRS has announced new guidance on how it will handle the tax consequences of being a victim of a Ponzi scheme — whether Madoff’s or any one else’s.

Yesterday, March 17th, IRS Commissioner Doug Shulman described the agency’s position in testimony before the Senate Finance Committee:

• The investor is entitled to a theft loss, which is not a capital loss. In other words, a theft loss from a Ponzi-type investment scheme is not subject to the normal limits on losses from investments, which typically limit the loss deduction to $3,000 per year when it exceeds capital gains from investments.

• The revenue ruling clarifies that “investment” theft losses are not subject to limitations that are applicable to “personal” casualty and theft losses. The loss is deductible as an itemized deduction, but is not subject to the 10 percent of AGI reduction or the $100 reduction that applies to many casualty and theft loss deductions

• The theft loss is deductible in the year the fraud is discovered, except to the extent there is a claim with a reasonable prospect of recovery. Determining the year of discovery and applying the “reasonable prospect of recovery” test to any particular theft is highly fact-intensive and can be the source of controversy. The revenue procedure accompanying this revenue ruling provides a safe-harbor approach that the IRS will accept for reporting Ponzi-type theft losses.

• The amount of the theft loss includes the investor’s unrecovered investment – including income as reported in past years. The ruling concludes that the investor generally can claim a theft loss deduction not only for the net amount invested, but also for the so-called “fictitious income” that the promoter of the scheme credited to the investor’s account and on which the investor reported as income on his or her tax returns for years prior to discovery of the theft.

Some taxpayers have argued that they should be permitted to amend tax returns for years prior to the discovery of the theft to exclude the phantom income and receive a refund of tax in those years. The revenue ruling does not address this argument, and the safe-harbor revenue procedure is conditioned on taxpayers not amending prior year returns.

• A theft loss deduction that creates a net operating loss for the taxpayer can be carried back and forward according to the timeframes prescribed by law to generate a refund of taxes paid in other taxable years.
  

A visitor to my website found it by asking this question in a search on Yahoo: “When does the statute of limitations run out for audits?”

The shortest answer is three years.

So the IRS Has Three Years – Three Years Starting When?

But that’s not quite enough information all by itself. The first, next question is: three years from what? What event makes the clock start ticking and counting down?

The shortest answer is that the clock starts counting down, when you, the taxpayer, file your tax return. But that’s not quite the whole story either:

The clock starts ticking upon filing when you file on the due date (like April 15th) or later. But, the clock does not start ticking if you file your return early. For example, if you filed your tax return on March 15th, a month before the day that’s so big on everyone’s mind, April 15th or “Tax Day” as some now call it.

Instead, if you file your tax return early, again, say on March 15th, the IRS will say ‘thank you very much,’ but the statute of limitations clock won’t start ticking until the due date, April 15th.

This is one of those things that puts the rules of taxes into a sort of bizarro-world (many would say one of many!).

The IRS Wants it Bad!

This early filing rule is a little strange because it seems to convlict with the IRS’s desire for taxpayers to file their tax returns. We know that the IRS wants taxpayers to file their tax returns, and, if a bureaucracy could have and express emotions, you could say that the IRS wants this badly. Really wants it. Really wants taxpayers to prepare and file their tax returns.

Yet, however bad the IRS wants it, the tax system’s rule that filing early doesn’t start the clock ticking discourages taxpayers from filing – or at least from filing early, and that seems just a little bit bizarre.

This rule discourages early filing because who wants to give the IRS a free ride? Who wants to give it even more time to decide whether to do things that can make your life difficult? And so, this rule seems to be at odds with the IRS’s strong desire to have taxpayers actually file their returns, though there are a few arguably reasonable reasons for having the rules set up this way.

Still, one would think that the IRS would be inviting and encouraging taxpayers to get their taxes filed, at all, on time, even early, and would add a few carrots to the bundle of sticks it brandishes at those who file late or not at all.

How Do We Know That the IRS Wants It Bad?

Just look at their rules! The IRS charges heavy penalties plus interest for filing late and for not filing at all. By doing this, the government punishes late-filers and non-filers by making it expensive.

And, more than making it expensive, if you ever want to make any kind of arrangement to resolve a tax problem, like if you wanted to set up a payment plan, or an offer-in-compromise or even to be put into “uncollectible status,” the first thing the IRS will insist on is that you get your unfiled tax returns filed.

Like Blofeld, Goldfinger, Largo, and so many other James Bond villains, the IRS says to taxpayers with unfiled returns, “No deals, Mr. Bond.”

Plus, if you want to try to get all or even some of your taxes discharged in bankruptcy, you must have filed your tax returns.

Filing your tax returns is one of five necessary elements to wiping out tax debts in bankruptcy. Again, without filing your tax returns, the Bankruptcy Court will be required by law to say, “No deals, Mr. Bond.”

No filed tax return = no discharge in bankruptcy.

So, does the IRS want it bad or what?

One more example: Hollywood movie star and convicted tax criminal Wesley Snipes: He has been sentenced to spend years in federal prison for committing the crime (yes, crime) – in fact, felony – of not filing tax returns.

Looking at these bunch of rules, let there be no doubt or dispute – the government wants us to file our tax returns, and has created a whole bunch of carrots and sticks (mostly sticks) to get us to do it.

Considering how badly the IRS wants taxpayers to file their tax returns, and to do so on time, you’d think they’d give taxpayers a gold star or something for being so organized and diligent that they filed early. But that just isn’t how it works.

With all the rules that articulate and carry out the government’s policies, it seems bizarro, but it is nonetheless true, that if you file your tax return early, not only do you not get a carrot, but in a way, you get a stick.

Because not only does the clock not start until the final due date for filing your tax return, but essentially, you are giving the IRS an automatic extension of its statute of limitations to decide what to do – whether to accept your return as correct and assess your tax bill based on what you submitted, or stop to wonder if there’s something wrong, and make your life more difficult by deciding to so examine – or audit – your return, and then assess your tax bill.

Conclusion: Three Years or More, Depending

To summarize: The IRS has three years to assess tax after you file your tax return. This time limit includes conducting an audit to examine the accuracy of a tax return and then assess tax after the audit.

The three-year statute of limitations starts with the date of filing a tax return if it was filed on the due date (like April 15th) or after the due date. If filed early, then the statute of limitations does not start to run until the actual due date for filing the return.

There are additional traps though: in some situations, the three-year statute of limitations never starts to run and so the IRS has an unlimited amount of time to audit and assess tax. I’ll take that up in another post. Stay tuned.

A taxpayer searching around the internet asked this question. It is a very good question because it asks about the reach — and the limits — of the IRS’s power to reach into our lives whether we like it or not.

Liens 101: What is a Lien, Anyway?

For those unfamiliar with the term, a “lien” is essentially a claim — someone claims you owe them money.

In certain situations, the person (or business, or government agency) making the claim can file a document announcing this claim with the County Clerk or other public records authority.

By filing a lien with the County Clerk, the claimant announces to the world (and especially to credit reporting agencies) that the claimant says you owe it money.

It’s like taking a private debt (or claimed debt) and shouting from the rooftops to everyone around: “you owe me money!”

And Why Should I Care?

This can have the real and negative effect on your life by damaging or even ruining your credit score, making it harder, more expensive, or even impossible to get a loan, mortgage or other credit. It can also make you ineligible for certain jobs.

The IRS uses the federal tax lien as part of its set of tools to make sure it collects taxes it says are owed. The IRS files a lot of liens. For example, in the last month, in New York City, on the island of Manhattan alone, the IRS filed 580 liens. That’s almost 27 liens filed every business day.

Don’t You Have to Owe a Lot to Have an IRS Lien Filed?

How much do you have to owe for the IRS to file a lien?

It is amazing how little it can take: it took owing as little as $41.06 to get the IRS to publicly file a federal tax lien. This $41 dollar lien, by the way was filed today (the date of this writing), February 12th, 2009.

The largest lien filed in Manhattan in the last month was for over $8 million dollars.

So, with that background, getting back to the reader’s question, putting it into Q & A form:

Q: Can the IRS file a lien without going to court?

A: Yes. The IRS does not have to go to court to file a federal tax lien.

One of the things that makes owing money to the IRS (and most or all state taxing authorities) so dangerous to taxpayers, whether they are individuals or businesses, is that the IRS has powers to compel payment that reach far beyond the powers of ordinary creditors.

If you owe the IRS back taxes, first, think of the IRS, the government as your creditor, like a department store, or a credit card company, your car company, your landlord, your bank that gave you a mortgage on your house.

Then, second, notice the difference between the IRS and your banker, your landlord, your car company: the IRS does not have to sue you and get a money judgment against your to file a lien against you.

For the IRS, It’s as Easy as 1-2-3, A-B-C, Do-Re-Mi

Apologies to the Jackson 5.

But, seriously, all the IRS has to do to be able to file a lien is (1) determine that you owe money, (2) tell you that you owe it and ask you to pay it, and (3) wait ten days. If you have not paid in full by the time those 10 days are up, the IRS has the power and authority to file a piece of paper — a notice of federal tax lien — with the local public recording authority, be it the County Clerk or other.

While, generally, the IRS does not file a notice of federal tax lien on the eleventh day, it certainly does have the power to do so, or to do so at any time after those three standards are met.

The filing of a notice of federal tax lien makes what was the extremely private matter of your taxes very, very public. And the IRS is empowered to do all this by only meeting the three criteria described above. The IRS simply does not have to walk through even a single door of a single courthouse to do this (unless the County Clerk is in the court house). No law suit needs to be filed, litigated, or won.

Where other creditors have to prove their case and persuade a judge, a jury or both, all the IRS needs is, by contrast, the stroke of a pen.

In the IRS’s own words:

Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.

The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).

This power and ease to file a lien is enormously different from pretty much all other creditors. It is one of many reasons why you don’t want to owe money to the IRS, and why you probably would be better off owing money to almost anyone else. And, why if you do owe money to the IRS you want to take action to change that.

You can find out more about avoiding trouble with the IRS (or starting to get out of trouble, if tax trouble is already here) by getting my free special report, “7 Big Mistakes Taxpayers Make and How to Avoid Them to (Legally) Keep the IRS OUT of Your Wallet, OUT of Your Bank Account, and OUT of Your Paycheck,” by clicking here.

Nashville, TN — A Tennessee man who operates a business installing complex sound systems in church auditoriums nationwide, pled guilty to two counts of failure to pay federal income tax. As part of his plea, he admitted that he owes the federal government more than $300,000.

After admitting guilt in August, 2008, the sentencing hearing took place in January 2009. The court sentenced Charles Grecco, 44, of Franklin, Tenn, to serve 6 months in prison, followed by one year of supervised release, and to pay restitution of $300,141.82 to the Internal Revenue Service.

According to the government, Grecco failed to pay more than $67,000 in federal income taxes for years 2001 and 2002 which was only two of the six tax years involved.

During the plea hearing, Grecco admitted that while operating the business, Sterling Group Audio, he did not make estimated tax payments as required by law even though he had funds to make those estimated payments on or before the due dates for making estimated tax payments..

The government’s investigation revealed that Grecco lived a lifestyle which prosecutors described as “lavish” during the time that he failed to pay his tax obligations.

Living a “lavish” lifestyle while not paying taxes drives the IRS crazy. Spending money on something else when a tax bill is due seems to make IRS agents’ and federal prosecutors’ blood simply boil. (Some may argue that living any life, even an un-lavish, plain one, while not paying taxes, may make more than a few IRS workers’ blood boil, but that’s something to take up on another day.)

Getting back to “lavish,” unpaid estimated taxes, and what it does to the IRS and prosecutors:

Think: indignant, huffy, angry, riled.

Think: red-cape-waved-in-front-of-snorting-bull.

Think: the girlfriend you broke up with when she didn’t want to break up with you.

Think: “Hell hath no fury ….”

(Then, though, it’s hard not to think of Ralph Waldo Emerson’s observation that “Of all debts, men are least willing to pay their taxes; what a satire this is on government.”)

Satire or not, though, Grecco did build up a significant tax debt.

And, satire or not, prosecutors made sure to identify what Grecco was spending money on rather than paying his estimated tax bills: Lasik eye surgery, elective plastic surgery, church donations (“generous” donations, to be sure), dance lessons, home-school tuition, several luxury vehicles, two expensive homes and a vacant lot (you know you’re really living it up when you splurge on a vacant lot!).

Grecco admitted that as of May 17, 2007, he owed more than $300,000 in taxes, penalties and interest for tax years 2000 to 2005, and then, to cap it off, during the sentencing hearing it was also revealed that Grecco had not paid taxes for 2006 or 2007.

Yesterday, President Obama signed into law legislation reauthorizing and expanding the State Children’s Health Insurance Program or S-CHIP, which was set to expire in March 2009.

Former President George W. Bush had previously vetoed two similar bills.

The measure increases federal tax on cigarettes by almost 62 cents a pack, to $1.01 a pack. This increase is expected to raise the $32.8 billion needed to pay for S-CHIP over the next four years.

Health and anti-smoking advocates hail the legislation as a victory for public health. The American Lung Association in New York put out this statement:

“Here in New York, the federal tobacco tax increase will prevent 77,400 youth from starting to smoke, help 41,300 adult smokers to quit and prevent over 35,000 smoking-related deaths.” See “CHIP a Win-Win for New York Children’s Health.”

And, the S-CHIP issue is not new. It’s been debated for years. See American Cancer Society’s Dr. Len Lichtenwold’s Cancer Blog post of 10/25/2007, “SCHIP, Children’s Health, And the Tobacco Tax.”

Still, the measure has its opponents. The Washington, DC-based think tank The Tax Foundation opposes it, arguing that “a politically popular and expensive program should never be funded by a small, low-income, politically unpopular minority like cigarette smokers.”

In its policy report, “Funding S-CHIP with Federal Cigarette Tax Increase is Poor Tax Policy,” The Tax Foundation asserts that higher cigarette taxes are “the most anti-poor method of funding S-CHIP.” It also argues “higher cigarette taxes encourage smuggling and associated crime,” and that “common arguments for cigarette tax increases don’t pan out.”

The Tax Foundation goes on to argue that opponents of smoking should advocate a total ban on tobacco rather than to promote a tax increase.

The anti-tax organization, Americans for Tax Reform, which is headed up by co-author of the 1994 Republican “Contract with America,” son of a tax assessor, and long-time opponent of taxes (some unresolved Oedepal issues here?), Grover Norquist, also opposed the bill.

Senator John McCain and thirty-three other senate Republicans voted against the bill.

When hearing the news that former masters-of-the-universe bankers are getting billions in federal aid – bailouts from their failures – who among us has not wished to receive our own personal bailout?

After all, almost none of us have been as irresponsible, reckless, even profligate as the banks and bankers whose wastrel ways have brought down the economy. What about the rest of us who try to make a living, pay our bills, make ends meet? Times are tough for all of us now.

While it is unlikely that any of us will be invited to testify before Congress to explain why the government should write a huge check to help out on our personal finances or the finances of our small businesses (personally, if Congress did invite me, I’d skip the private jet the first time, and fly commercial or take a train or drive) , the IRS – of all government agencies – is promising relief for taxpayers and particularly taxpayers who have fallen behind in paying taxes.

The IRS is now trying to make things easier? This, the agency that just thinking about can make some of us break out in hives, seeing an envelope in the mail with the IRS’s return address can make a persons stomach turn or start a cold sweat, the agency we often hate and fear, the agency with tremendous power to disrupt our lives? These guys are now trying to make things easier?

According to a January, 2009 news item published by the IRS, new IRS Commissioner Doug Shulman talked about how the downturn in the economy is affecting taxpayers who owe back taxes. “We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today.”

Commissioner Shulman added that the IRS wants “to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”

According to the IRS, it’s agents have the ability ease the burden on taxpayers by doing things like postponing collection actions (i.e., things like levying bank accounts, garnishing wages, filing tax liens), avoiding marking taxpayers as being in default when a payment on a payment plan or offer in compromise is missed (if you have one of these deals, you really do not want to default!), re-evaluating offer in compromise applications to take into account reduced home values, and expediting levy releases.

These steps, which the IRS describes as a change in policy, suggest that it is attempting to strike a delicate balance between it’s responsibility to raise money for the United States Government, and to work with taxpayers so that the burden of paying taxes, or catching up on unpaid back taxes, is not unbearably heavy.

This is always balancing act, but is even more so now. The United States government has needed more and more money in recent years, since the historic budget surplus of the late 1990s was transformed in the 2000s to the historic, largest deficit, and the IRS has responded by increasing its collection efforts every year since the early 2000s. Meanwhile, now, economic times are the worst they’ve been since the Great Depression.

While some policy watchers and tax practitioners question whether the IRS will actually do anything differently than before Commissioner Shulman’s recent remarks, the IRS is now stressing its newly stated policy of flexibility in collecting back taxes.

Though this is not quite the multi-billion dollar bailout of the major banks and car companies, if the IRS really does what the Commissioner says, it could still be a real life-saver to a lot of taxpayers.

When the more than 100,000 boots-on-the-ground IRS employees who carry out the work of the IRS and execute its policies, assuming they actually put into practice the new policies of greater flexibility, now could be a better time than any in recent years for taxpayers who have lingering, nagging back tax problems to come in from the cold and get to work on solving those problems.