The IRS is allowing more flexibility for individuals with existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship.  Depending on the situation, the IRS may allow a skipped payment or a reduced monthly payment amount. .

An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than 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 OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay are not necessarily 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.

Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to make changes to their orginal agreement / offer to avoid default.

The IRS has implemented new ways and now has greater authority to suspend collection actions in hardship cases where taxpayers are unable to pay. If an individual has recently encountered a job loss or other financial problem, IRS may be able to suspend collection in some situations without documentation to minimize burden on the taxpayer; Contact us for further information.

Oct. 10, 2008

The IRS cautions taxpayers to avoid getting caught up in a new tax fraud disguised as a debt payment option for credit cards or mortgage debt. The fraud is also marketed as a way to reduce taxes or pay outstanding tax liabilities. It involves the filing of Form 1099-OID, Original Issue Discount, and/or bogus financial instruments such as bonded promissory notes or sight drafts.

This fraud has evolved from an earlier frivolous argument that a “strawman” bank account has been created at the Treasury Department for each U.S. citizen, and that individuals could use such “strawman” accounts to pay debts and claim withholding credits.

The IRS addresses the “strawman” argument in Revenue Ruling 2005–21 and Revenue Ruling 2004-31, and discredits the use of this position for income tax purposes. Moreover, the courts that have reviewed the “strawman” argument and other similar arguments have found them frivolous.