Tax Law to the Rescue: 6 Ways the IRS is Giving Relief to Taxpayers

ABA Law Journal has put together a very well thought, and informative article on how the IRS is giving more relief to taxpayers this year than they have in the past. The author examines recent tax law changes over the past year and put together a list of ways the federal government is helping taxpayers. Below is a short list of the recent changes, but to read the full list click here.

1. A break for first-time homebuyers

2. Standard deduction increases

3. More help for hurricane victims

4. A break for military personnel

5. Some relief from the AMT

6. Simplifying low-income housing credits

Hurricane Gustav Victims Qualify for IRS Disaster Relief

According to the newest press release form the IRS, they have setup a program to provide relief for victims of Hurricane Gustav. Below is a snippet from the release, but click here to read the full text, and to learn how to qualify for disaster relief.

“The IRS is postponing until Jan. 5, 2009 deadlines for taxpayers who reside or have a business in the disaster area. The postponement applies to return filing, tax payment and other time-sensitive acts otherwise due between Sept. 1, 2008 and Jan. 5, 2009. This includes:

Individual estimated tax payments due Sept. 15, 2008.

Corporate extended 1120 tax returns due Sept. 15, 2008.

Individual extended 1040 tax returns due Oct. 15, 2008.

‘As residents of Louisiana return to their homes following Hurricane Gustav, taxes are one thing they won’t need to worry about,’ IRS Commissioner Doug Shulman said. ‘This relief gives them extra time to get their lives in order before having to deal with their tax matters.’

In addition, the IRS will waive the failure to deposit penalties for employment and excise deposits due on or after Sept. 1, 2008 and on or before Sept. 16, 2008 as long as the deposits are made by Sept. 16, 2008.

Taxpayers who reside in or have a business located in the following parishes qualify for the relief announced today:

Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Cameron, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, Rapides, Sabine, St. Bernard, St. Charles, St. James, St. John the Baptist, St. Landry, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Vernon, West Baton Rouge and West Feliciana.

IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief. Affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request tax relief.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing or payment due date between Sept. 1, 2008 and Jan. 5, 2009.”

IRS Unveils Foreclosures Section of IRS.gov

The IRS’ official website, IRS.gov has unveiled a new section of their website devoted to providing information to families who have had increased tax liabilities due to foreclosures. The IRS is letting families know that although "foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes." However, providing relief after people are already in debt to the IRS doesn’t really solve the problem. The only thing in the IRS’ announcement that really seems to address a solution is when they say "the IRS urges struggling homeowners to consider their options carefully before giving up their homes through foreclosure." Unfortunately this is the best we will probably see any time in the near future as the only way to really fix the problem is for Congress to step in and change the tax code so that it no longer considers foreclosure relief taxable income.