It has been recommended that the 20% deposit on OICs be dropped.
IRS, National Taxpayer Advocate Testify on Recent Tax Compliance Challenges Facing Taxpayers and IRS


IRS Deputy Commissioner for Services and Enforcement Linda Stiff testified on how the IRS is assisting financially struggling taxpayers at a House Ways and Means Oversight Subcommittee hearing on February 26. National Taxpayer Advocate Nina Olson also testified before the subcommittee on obstacles that taxpayers are experiencing when seeking assistance from the IRS.


IRS Help for Struggling Taxpayers


Stiff testified about the range of services that the IRS is using to help taxpayers facing financial difficulty in paying their tax bill or understanding their tax obligations. According to Stiff, the IRS has given "frontline collection personnel" greater flexibility to work with taxpayers who may owe taxes, especially previously compliant taxpayers. She added that the IRS has also given employees more leeway to work with taxpayers who have minimal documentation.



Depending on the circumstances, Stiff also said that taxpayers may be able to adjust payments for back taxes, avoid defaulting on a payment agreement or possibly defer collection action. Additionally, IRS personnel are offering installment agreements and offers-in-compromise (OIC) and other added flexibility for missed payments.


IRS Programs


Stiff also reported that the IRS in 2009 added a "What If's?" section to its website to answer taxpayers' commonly asked questions on a variety of issues, including job loss and home ownership. According to Stiff, the IRS is also trying to modernize its systems to expedite refunds.


Room for Improvement


Olson testified that the IRS's procedures discourage taxpayers from using collection alternatives like offers-in-compromise (OIC) and partial payment installment agreements. Based on fiscal year (FY) 2008 data, Olson reported that only one out of 78 delinquent accounts was granted a collection alternative by the IRS. Olson reported that, while the number of offers has declined, so too has the number of accepted offers. In response to questions from panel members, Olson criticized the IRS's collection alternatives as being inaccessible to taxpayers.



According to Olson, the OIC program is almost obsolete because taxpayers are unable to use it under current IRS guidelines. She responded to inquiries from panel members about how to enhance the OIC program by suggesting that the IRS eliminate the 20-percent down payment requirement and engage in "vigorous outreach" on the program.