In these difficult economic times, repaying the IRS is becoming harder than ever. Installment agreements may be entered into in good faith, but while payments are being made, interest and penalties continue to run. Every five years, interest and penalties double the original tax. Most attempts to repay the IRS result in the amount owed increasing, not decreasing, because of this.
Very few people that owe money to the IRS want to be there. For most, it is a life situation that puts them there – a failed business venture, divorce, medical problems. But the weight of IRS interest and penalties often makes it impossible to get a fresh start – purchase a home, get remarried, start a new profession. This economy amplifies the impact.
Because of that, I have proposed to Treasury Secretary Timothy Geithner that he implement a program of relief for IRS interest and penalties. For those that are out of the system and who come forward, and for those that are in the system but are treading water, forgive interest and penalties if the tax can be repaid over an agreed upon payment plan.
This would bring people back into the system, close the tax gap and stimulate the economy by helping taxpayers get out of debt.
Let me know what you think.