The IRS Creates New Programs to Assist Struggling Taxpayers

The Recession has hit many Americans hard. As we get into tax season, many people may not realize that events such as a job loss or new unexpected burdens may have tax implications that need to be addressed on your return. The good news is that the Internal Revenue Service recently announced that it is outlining additional steps to help unemployed taxpayers and other individuals meet their tax obligations. The IRS views the current economic climate as a way to reach out to taxpayers and promote new ways for people to receive help; the agency believes that its new initiatives will help ease the burden on taxpayers who are having a difficult time weathering the financial crisis.


Among the steps the IRS is taking to help taxpayers is an “open house” program. It is set up to allow taxpayers to interface with agents and work out tax problems in person. The IRS will announce locations, dates, and times shortly, and they expect to hold them on a few Saturdays throughout the year. If you are having financial difficulties or are looking for ways to save money, it may be a great idea to attend for two reasons:

  1. The IRS is seeking to use these open houses as an opportunity to explain to taxpayers what tax breaks they may be entitled to. This includes the Homebuyer Tax Credit, which offers a credit to first-time homebuyers, the American Opportunity Credit, which credits full-time students or those who perform community service, the Making Work Pay Tax Credit, which is a credit for employed individuals who make under $75,000 in personal income, and the Expanded Earned Income Tax Credit, which credits low-income workers and helps offset the burden of payroll taxes.
  2. If you are unemployed, the IRS states that it will offer taxpayers the opportunity to make payment arrangements (such as paying in installments) and have interest charges waived.

In addition to the open houses, the IRS opened a new section on their official website, titled “Tax Center to Assist Unemployed Taxpayers”, which provides online publications and videos about the impact unemployment has on taxes and possible tax credits, in addition to assistance with filing and paying taxes. The IRS also is providing advice to unemployed taxpayers about starting their own businesses.

Another helpful resource on is a dedicated section of “What If” questions. The section aims to  answer taxpayers questions during the economic downturn. This is especially helpful because taxpayers can find out what tax credits they may be eligible for – credits that could add up to a big savings for them.

Here are some helpful tidbits from their “What If” section:

  1. If you are unemployed, you may be able to deduct incurred expenses while looking for a job, even if your job search comes up empty – these include employment agency fees and travel expenses among other things.
  2. If your income has been greatly reduced due to job loss or a salary cut, you may be eligible for the Earned Income Tax Credit, mentioned earlier. This tax credit assists individuals and families who earn low to moderate incomes.
  3. Per the Mortgage Forgiveness Debt Relief Act of 2007, if you foreclose on your home or secure a mortgage loan modification, you may be able to exclude income from your taxes as a result of the foreclosure or modification.
  4. If you don’t think you will be able to pay your taxes on time, the IRS will allow you to pay as much as you can and offer you an extension or have you agree to an installation plan.
  5. If your income changed or you welcomed a new child into your family, you will be able to receive an economic stimulus check. The maximum credit is $1,200 for a married couple who earn less than $150,000, and a $300 credit for each qualifying child 16 years of age and younger.

As you can see, there are quite a few ways in which you can save money through tax credits, especially if you are unemployed or having financial difficulties. It is worth taking advantage of the new initiatives the IRS is putting into place, especially the opportunity to learn about these credits and solve any tax issues face-to-face, while it lasts. That way not only can you potentially save a lot of money this tax season, but you can prevent the IRS from giving you any trouble should you have difficulty paying your taxes.

This is a guest post from Kathryn Katz. Kathryn is a Certified Personal Finance Counselor and works for Consolidated Credit Counseling Services. The non-profit credit counseling agency specializes in debt consolidation and helps consumers that are in financial distress.

Photo credit: aFicus

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