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What has been the IRS’s reaction to the recession?  IRS issued a Policy Statement on January 6, 2009 addressing collection issues.  IRS Commissioner Shulman stated:

“Times are tough for many people, and the IRS wants to do everything possible it can to help people who have lost their job or face financial strain.  We continue to do everything we can to help ease the burden on struggling taxpayers.”

He announced five steps to address collection problems:

1.  Greater authority to suspend collection in cases where the taxpayer is unemployed or underemployed, relies on Social Security or faces illness or medical bills.  In cases of illness or medical bills, they will suspend collection without documentation.

2.  Flexibility for missed installment payments.

3.  Expedited levy releases

4.  Second review for Offer in compromises with home values in question.  IRS will reevaluate equity in real estate due to falling market.

5.  The IRS will be flexible to avoid defaults in Offer in compromise payments to prevent OIC defaults.

These are the promises, but what is the reality.  The reality has been a mixed bag since January 6, 2009.

The IRS has been good about speeding the delivery of levy releases.  Historically IRS employees would often slow play or lolligag the release of levies causing substantial harm and hardship to taxpayers in financial distress.  IRS employees  have been releasing levies timely.

They are suspending collection in cases of medical and illness and not requiring documentation.

However, despite the Policy Statement, employees in the field are no more inclined to flexibility today than in the past.  You must have an aggressive Advocate to push the issue.  The average IRS employee is not likely to offer flexibility or even know it exists.  The National Taxpayer Advocate recognized when she reported in her “Fiscal Year 2011 Objectives Report to Congress issued on June 30, 2010:

“The National Taxpayer Advocate is concerened about the IRS’s failure to fully implement its announced initiatives to help taxpayers who are experiencing economic difficulties.”

The battle goes on.

Happy New Year.

Dana M. Ronald

January 1, 2011