IRS Loosening Reins on Taxpayers

TAX MAN: Jonathan Hermosa, dressed up as Statue of Liberty, stands on Myrtle Avenue advertising nearby Liberty Tax service on Monday in the Queens borough of New York City. The U.S. federal tax deadline is midnight April 15, and accountants around the cou (Chris Hondros/Getty Images)

Ahead of Tax Day on Wednesday, the Internal Revenue Service says it’s going to be lighter on taxpayers this year since millions of Americans face job loss and financial woes.

IRS Commissioner Douglas Shulman discussed some initiatives to give a helping hand, during a Monday afternoon press conference. The conference was hosted by the National Press Club in Washington, D.C.

People are still required to file taxes, regardless of their financial situation. Yet, even if someone can’t afford to pay taxes this year, the IRS may allow a skipped payment or a payment reduction. “If you think you can’t pay, you need to come in, we'll talk it through with you, and there’s a number of options and steps that we can pursue,” Shulman said in a live airing of the conference.

“We’re going to go the extra mile during these tough economic times to help you out if you’re in distress,” he said.

Shulman emphasized that the IRS is aware of people’s financial situations—more so than any other government branch—as they see the financial statements of nearly every individual and business in the country.

“Every year we interact with every American citizen, every business, every non-profit in the U.S. How we go about doing our job matters quite a bit because how we do our job can affect how the American people actually think about their government and think about is their government working for them,” Shulman said.

The IRS is expecting close to 150 million tax returns this year and is “anticipating sending out about $300 billion this year in regular tax returns”—not including the money from the stimulus package, he said.

The IRS is walking a fine line. Facing the economic downturn, Shulman explained they are trying to be “flexible” and use good judgment.

They still need to raise money to fund the government and be “tough” on those who don’t pay taxes. Yet, they want to “provide tangible relief to taxpayers in distress and help others from straying across the line into non-compliance,” he said.

Several credits and benefits have been put in place this tax season to alleviate pressure for tax payers. Among them are the up to $1,500 tax credit for installing energy efficient windows, $8,000 tax credit for first time home buyers, and $3,600 tax credit for college students affected by natural disasters in the Midwest.

“Taken together, all these tax credits, benefits, and assistance, they demonstrate what Thomas Jefferson said: ‘Institutions must advance also and keep pace with the time,’” Shulman said.

“Even when the time is as unsettling as today.”

Conversely, the IRS isn’t going soft and has some new tools to find those who fail to pay taxes, which they “plan to take full advantage of.”

One is a new global tax administration that will help ensure corporations and individuals “play by the rules” and pay what they owe. It will help the IRS catch those who are evading taxes by wiring money to other countries or using foreign banks to hide funds.

Shulman explained that while many Americans struggle to pay taxes, “there is very little tolerance for those who have the means to pay their taxes but shirk their responsibilities. The IRS has been turning up the pressure on offshore financial institutions that help U.S. citizens conceal taxable income,” he said.

“There is no silver bullet or one single strategy that will alone solve the problems of offshore tax avoidance. Rather, an innovative approach is needed, made up of separate but complementary programs that will tighten the net around those who need to pay what they owe.”