During this recession, taxpayers are experiencing financial difficulties. In 2008, there were 3.4 million foreclosure filings and 2.6 million job losses. Many taxpayers are struggling to meet their daily living expenses as they face a wide range of financial and personal issues, which may make it difficult to meet their tax obligations.

On January 6, 2009, the IRS kicked off the 2009 filing season with an announcement of steps taken to help financially distressed taxpayers.  The IRS announced that its employees have greater flexibility to assist struggling taxpayers and may be able to adjust payments for back taxes, expedite levy releases, or postpone collections.  Further, the IRS encouraged taxpayers to take advantage of new and existing credits (such as the first-time homebuyer credit and the earned income tax credit), deductions (such as the standard deduction for real estate taxes), and electronic filing options (such as Free File Fillable Tax Forms) to maximize and expedite refunds.

The National Taxpayer Advocate, an independent official appointed to address taxpayer problems (established in Public Law 104-168), indicates that more action may be warranted to address the problems of struggling taxpayers.  The Taxpayer Advocate’s most recent report to Congress focused on the challenges to taxpayers and tax administration during the economic downturn.  The report recommended that the IRS change some of its collection practices in order to avoid exacerbating the financial distress of taxpayers.  The Taxpayer Advocate noted that the IRS is underutilizing collection alternatives, particularly offers in compromise and partial pay installment agreements, and IRS employees need more guidance on how to identify and help distressed taxpayers.

The Subcommittee will discuss the specific problems encountered by taxpayers during this recession.  The Subcommittee will review the steps taken by the IRS to assist struggling taxpayers and consider recommendations of the National Taxpayer Advocate.

Posted at 05/03/2010 05:27:06 PM