The IRS recognizes that many people are going through difficult times financially. Often, there is a tax impact to events such as job loss, debt forgiveness or dipping into a retirement account, said Michael T. Devine, Kansas-Missouri IRS representative.
“If your income has decreased, you may even be eligible for certain tax credits, such as the Earned Income Tax Credit, which can mean money in your pocket,” he said.
Most important, people who believe they may have trouble paying their tax bill are encouraged to contact the IRS immediately.
“There are steps the IRS can take to help,” he said.
The IRS has some put some “What if” scenarios and the possible tax impact on the IRS Web site.
Devine said taxpayers can go to www.IRS.gov and type the keywords “What If” in the “Search” box at the top of the page.
Job-related categories include: What if I lose my job? What if my income declines? What if I withdraw money from my IRA? What if my 401(k) drops in value?
Debt-related scenarios could include: What if I lose my home through foreclosure? What if I sell my home for a loss? What if my debt is forgiven?
Tax-related questions include: What if I can’t pay my taxes? What if I can’t pay my installment agreement? What if I can’t resolve my tax problem with the IRS? What if I need legal representation to help with my tax problem but can’t afford it?