Most Serious Problem: Economic Hardship

Economic hardship, as defined in Treasury regulations and the Internal Revenue Manual, occurs when an individual is “unable to pay his or her reasonable basic living expenses.”  Although Congress requires the IRS to halt some collection actions, like a levy, if a taxpayer is in economic hardship, the IRS is not proactive in identifying these taxpayers throughout the collection process.  This means that the IRS does not have a method to alert collection employees that a taxpayer may be at risk of economic hardship and, when responding to taxpayer inquiries, to ask questions about the taxpayer’s finances to determine an appropriate collection action or alternative.  As a result, taxpayers may be lured into entering installment agreements (IAs) they cannot afford, violating their right to be informed, to right to quality service, and right to a fair and just tax system.

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