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Low income taxpayers could be spared from IRS collection actions

It is one thing to have to deal with the perils of losing a job or having a prolonged illness and how it can affect one’s financial condition, but it is quite another to deal with the Internal Revenue Service when you are having trouble making ends meet. In a number of our posts, we have highlighted the IRS’ ability to initiate levies and to garnish one’s wages. But when a person is experiencing extreme or prolonged financial difficulties, IRS collection actions may have far reaching implications.

For instance a levy or garnishment may prevent a person from paying rent, buying food or paying vital utilities; all of which are essential for maintaining a basic standard of living. Given the possibility of such extreme consequences, Congress will be considering a bill that limits the IRS’ ability to initiate levies or garnishments on financially vulnerable individuals. 

The Taxpayer Economic Hardship Protection Act of 2015 would apply to individuals who make less than 250 percent of the federal poverty rate for their respective household size, and would set into law a 2011 tax court holding that the IRS could not use its collection powers against individuals who are facing economic hardships even if they have unfiled tax returns.

While the proposed law would not release individuals from their tax liability once their financial situation improves, it would help in exacerbating economic problems that could lead to additional social problems. It remains to be seen whether it will be voted upon and made into law. In the meantime, if you have questions about how to deal with tax problems, an experienced attorney can help. 

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