The IRS gets all mushy

The Internal Revenue Service wants to hear about your troubles.

Lost your job? Have high medical bills? Can't sell your home? Losing your home?

Whatever your problem, if it means you can't pay your taxes, just tell the IRS.

The agency recognizes that many people are facing "extraordinary challenges because of the economy," IRS Commissioner Doug Shulman told a bunch of reporters on a conference call last week.

So the agency will be kinder and gentler, all about service. Indeed, Shulman said right up front that he was going to talk about service, not enforcement.

That doesn't mean the agency will be a pushover.

"We are going to continue to enforce the law ... and we anticipate that a majority of Americans will be able to pay taxes," he said. "We're not forgiving taxes."

What the agency is doing is giving employees more authority to make judgment calls.

Some of the changes:

* IRS employees will be able to postpone collection actions if a taxpayer proves he or she simply can't pay because of financial hardship.

* Taxpayers who are already paying off back taxes through an installment agreement won't blow the agreement if they have a compelling reason for missing a payment.

* The IRS offers the same sort of deal to taxpayers who have what the agency calls an offer-in-compromise, which means the IRS has agreed to accept less than the amount owed as long as payments are kept up-to-date. Skip a payment now, and all the old debt pops back up. This year, if financial difficulties keep you from making a payment, something will be worked out -- if you let the agency know of your distress.

Indeed, that needs to be stressed: You can't just skip a payment or not file your taxes. Do that, and you'll see mean Uncle Sam, not your kindly old uncle. Whatever your situation, you still need to file, pay what you can if you can and most certainly call the agency at 800-829-1040 to discuss options.

The agency also has set up a special unit to work on cases in which taxpayers have been denied an offer-in-compromise because of the amount of equity in their homes.

In the past, if the IRS saw you had equity, that was as good as money in the bank. And that, of course, was money with which you could pay your taxes. Now, recognizing that many homes aren't worth what a piece of paper might say they are worth, the agency will take a second look.

The IRS also has a little gift for those who aren't in distress: It has expanded its free electronic filing service so that nearly everyone qualifies to use it.

One example Shulman gave of the agency's efforts to help is a new section called "What if ... ?" on its Web site, www.irs.gov. There you'll find answers to such questions as: What if I lose my job? What if my income declines? What if I lose my home through foreclosure?

I clicked on the job one to see just how kind Uncle was going to be. What I found was this:

"Severance pay and unemployment compensation are taxable. Payments for any accumulated vacation or sick time also are taxable. You should ensure that enough taxes are withheld from these payments or make estimated tax payments to avoid a big bill at tax time. Public assistance and food stamps are not taxable."

I don't know about you, but that gives me the warm fuzzies all over.