EDMOND — Internal Revenue Service officials Tuesday announced changes for the coming tax season, saying the IRS is, at least for the time being, a kinder, gentler agency.

A kinder, gentler IRS?

Rising numbers of Americans have lost jobs and home value, and face other hardships related to the recession, and in response the IRS has made changes to accommodate financially distressed taxpayers, IRS Commissioner Doug Shulman said during a press teleconference.

“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman said. “We want to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”

Shulman said IRS assistance includes postponement of collection actions, added flexibility for missed payments, additional review for offers in compromise on home values, prevention of offer in compromise defaults and expedited levy releases.

Depending on the circumstances, taxpayers in hardship situations may be able to adjust payments for back taxes, avoid defaulting on payment agreements or possibly defer collection action.

C.R. Trout, who lives just north of Edmond, said he supports the agency’s efforts to help financially distressed taxpayers.

“I agree with it,” Trout said. “These folks need all the help they can get.”

Trout owns several assisted-living facilities in Oklahoma, and said he sees how the recession is affecting elderly taxpayers. Some have lost value in their investment portfolios to the point that they need help from their children, some of whom also are financially strapped, he said.

“It has an adverse affect on everybody, especially our elderly people,” said Trout, who has someone else prepare his taxes.



IRS SOS

During the teleconference Shulman highlighted several ways the IRS is providing flexibility for financially distressed taxpayers.

The IRS is allowing more flexibility for previously compliant individuals in existing installment plans who have difficulty making payments because of a job loss or other financial hardship. The IRS may allow a skipped payment or a reduced monthly payment amount without automatically suspending the Installment Agreement. Shulman encouraged taxpayers in a difficult financial situation to call the IRS.

Another change is additional review for offers in compromise on home values. An offer in compromise, an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed, may be a viable option for taxpayers experiencing economic difficulties.

However, the equity taxpayers have in real property can be a barrier to an offer in compromise being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay may not be accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new second review of the information to determine if accepting an offer is appropriate.

Also, taxpayers unable to meet the periodic payment terms of an accepted offer in compromise will be able to contact the IRS office handling the offer for available options to help them avoid default.

Shulman also discussed expedited levy releases. The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases for levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. Taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.



Tax filing options

This year, electronic filing options will speed the payment of refunds to millions of taxpayers, Shulman said. For example, taxpayers who e-file and choose direct deposit for their refunds will receive their refunds in as few as 10 days. That compares to about six weeks for people who file a paper return and receive a traditional paper check.

The IRS is again offering free tax preparation and filing through its Free File program. Taxpayers with an adjusted gross income up to $56,000 can use the standard Free File options this year. About 98 million Americans are eligible, Shulman said.

Both the fillable-forms option and the previously available Free File offerings are available only through the IRS.gov Web site. More information will be available in mid-January.

Taxpayers can begin e-filing Jan. 16.

The IRS is producing a number of podcasts this filing season that will be available at the IRS Web site. In addition to tax tips, fact sheets and news releases, these short audio interviews cover a wide range of topics and are a way for the IRS to reach out to a new generation of taxpayers.



New IRS tax benefits

The IRS encourages taxpayers to explore the numerous tax breaks available and take every credit, deduction and exclusion for which they qualify. People who had less income in 2008 could find they qualify for credits for which they previously did not qualify. And there are several new benefits this year:

First-time homebuyer credit: Those who bought a principal residence recently or are considering buying one should take note. This unique credit of up to $7,500 works much like a 15-year interest-free loan.

Standard deduction for real estate taxes: Taxpayers can claim an additional standard deduction, based on the state or local real estate taxes paid in 2008. The maximum deduction is $500, or $1,000 for joint filers.

Mortgage workouts and foreclosures: For most homeowners, these are now tax-free. Eligible homeowners can exclude debt forgiven on their principal residence if the balance of the loan was less than $2 million. The limit is $1 million for a married person filing a separate return. See Form 982 and its instructions for details.

IRS.gov, the official IRS Web site, has more information on these and other popular credits, such as the child tax credit, the Earned Income Tax Credit and alternative fuel vehicle credit.



Source: Internal Revenue Service