Protection From IRS Collection For Low-Income Taxpayers Proposed

Posted by Jeffrey Siegel on April 28, 2015

Congresswoman Introduces Bill to Limit IRS Wage Garnishments and Property Seizures

(From Accounting Today)

Rep. Bonnie Watson Coleman, D-N.J., has introduced legislation that would provide relief to low-income and economically vulnerable Americans who would otherwise be subject to wage garnishments by the Internal Revenue Service.

The Taxpayer Economic Hardship Protection Act of 2015 would codify procedures to ensure the IRS cannot issue levies, including wage garnishments, retirement account garnishments, or seizing of any property, against those who qualify as likely to experience economic hardship, defined as individuals with incomes at less than 250 percent of the federal poverty rate.

“If you’re making $29,000 dollars a year, roughly the amount that the IRS defines as economic hardship, every penny you get is going toward things that are keeping you above water, things like rent, groceries, and train fare to get you to and from your job,”  Watson Coleman said in a statement Wednesday. “Recklessly recouping the funds from already economically vulnerable Americans will be the final financial blow for these families. This bill ensures that the IRS uses the tools already at its disposal to responsibly manage tax collections.”

Current law requires the IRS to release a levy if it is determined that such action will create an economic hardship on the taxpayer involved. An economic hardship does not remove tax liability, but instead of a levy, the IRS can work with an individual to establish a payment plan or other more manageable means of collecting the debt. However, despite a U.S. Tax Court decision in 2011 that clarified the IRS cannot issue levies on taxpayers in economic hardship even if they have recent unfiled returns, and further guidance from the independent Office of the Taxpayer Advocate, the IRS continues to levy taxpayers facing financial difficulty.

The Taxpayer Economic Hardship Protection Act of 2015 would codify the recommendations of the Taxpayer Advocate to protect low-income and economically vulnerable taxpayers. Specifically, the bill would establish IRS quality review procedures to ensure that economic hardship taxpayers are properly categorized to avoid issuing improper levies; adjust the federal payment levy program to ensure that the low income filter includes accounts with unfiled returns, and Improve training for IRS collections employees as to how to manage economic hardship cases.

Call your Kansas City Tax Attorney, Jeffrey R. Siegel, if you or your clients need assistance handling the IRS.