IRS to Bail Out Taxpayers?

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.

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