The IRS Now Willing to Help

Credit issues have never concerned the IRS – unless you were trying to deduct interest on personal debt, or you weren’t paying the principal and interest due them on an installment agreement.

But now, in the face of widespread unemployment and consumers’ inability to keep up with monthly obligations, the IRS has moved toward leniency.

In order to help homeowners who are attempting to sell homes that are now worth less than the mortgage balance, the IRS is speeding up the process of moving their tax liens to a different asset. Until now, getting approval from the IRS to complete what is known in the housing industry as a “Short Sale” could take up to 8 weeks. By that time, foreclosure might have been finalized or the buyers gone on to a home they could buy in less time.

In addition, they are going to show more flexibility in helping individuals who are having trouble paying their income taxes.

IRS Commissioner Doug Shulman said he has given instructions to employees to be more understanding in hardship cases. IRS agents will now have grater authority to suspend tax-collection actions in hardship cases. These would include instances in which taxpayers rely on Social Security or welfare income, have lost their employment, or face a serious illness or staggering medical bills.

For those individuals who have agreed to a payment plan to meet their tax obligations, the IRS may now allow a skipped payment or a reduced monthly payment. In the past, such actions would automatically suspend the installment agreement and the IRS would immediately move to attach bank accounts and file liens on property.

One caution: Don’t just miss a payment or send in a lesser amount and expect leniency. If you know you won’t be able to meet an obligation, contact the IRS right away. You’ll have to explain why you are unable to make the payment as agreed.

For taxpayers who are counting on their 2008 tax refund to catch up on other bills, the IRS recommends filing electronically. In addition, choose a direct deposit to your bank account as the method of payment. Both of these choices will put your refund in your hands much faster than filing a paper return and waiting for a check in the mail.

You’ll be able to file your return electronically beginning January 16.

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Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.