Local tax experts are noting an increase in inquiries from consumers who have lost their jobs and have no means to pay their income taxes.

"We've seen that more lately," said Nick Elliott, owner of Liberty Tax Service in Cedar Falls.

Some of their plight comes from a lack of planning, particularly in the case of unemployed workers who have not had taxes withheld from unemployment checks, Elliott said.

"Even though on your federal return, the first $2,400 is not taxable, any amount over that is," he said. "So, we've seen people who have gotten into situation, where they didn't have enough taxes withheld. And, if they didn't have a job, they didn't qualified for the Earned Income Tax Credit.

The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for low to moderate income working individuals and families. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

Iowa expanded its earned income tax credit in 2007, making the state tax credit available to more than 85,000 additional Iowans. In tax year 2007, 202,100 Iowans claimed the state earned income tax credit and received $23.6 million in the form of lowered taxes and tax refunds.

Iowans can receive free assistance in claiming the earned income tax credit by visiting free tax preparation sites. A list of free tax preparation sites as well as free electronic filing for eligible Iowans can be found on the Iowa Department of Revenue Web site: www.iowa.gov/tax/.

According to the Internal Revenue Service, one in four Americans who are eligible to claim the federal earned income tax credit do not claim it, costing each of these taxpayers and their families as much as $5,600.

Iowa families earning up to $48,279 per year may qualify depending on the number of eligible dependents.

In Waterloo last year, 6,477 taxpayers received EITCs totaling $12,933,589, with an average credit of $1,997.00.

The IRS stresses that it is important that all taxpayers file a tax return by the April 15 deadline, even they can't pay the bill, said Christopher Miller, IRS Iowa spokesman.

"If you can't pay the full amount of taxes you owe, the IRS still recommends you file your return by the deadline and pay as much as you can to avoid further penalties and interest," Miller said. "The failure-to-file penalty is much greater than the failure-to-pay penalty."

There's some positive reinforcement for filing, as well, Miller said.

"By filing your taxes, you may also be able to take advantage of potentially new credits -- refundable credits in some cases -- that you may not have been eligible for before your income changed."

The IRS offers options -- including an installment plan -- for taxpayers who can't pay their full bill before the deadline, Miller said. In some cases, an arrangement called an "offer in compromise" will allow the taxpayer to settle up for less than the full amount owed.

"Absent of special circumstances, an offer will not be accepted if the IRS believes the liability can be paid in full through a lump sum or through a payment agreement," Miller said. "Absent special circumstances, we in general would opt for an installment agreement or other arrangement."

Miller suggested checking the agency's Web site, www.irs.gov, or calling toll-free (800) 829-1040 to discuss problematic scenarios and possible options.

"It seems like it has been more of a problem over the last couple of years, that people had difficulty paying their taxes," Waterloo-based tax attorney Kevin Ahrenholz said. "It appears enforcements may have been stepping up a little as well."

Beyond an offer in compromise and payment plan, taxpayers may opt for a Chapter 13 bankruptcy filing, which falls under the jurisdiction of a federal bankruptcy court and outside the authority of the IRS, Ahrenholz said.

Not taking some action is not advisable because the government can garnish wages and go after assets, Ahrenholz said.

"Chapter 13 is a repayment plan available to somebody who can make a payment over three to five years to a trustee," Ahrenholz said. "That's a way somebody can in fact pay off quickly and where the IRS might come in and put a levy against the home or wages. The Chapter 13 can stop that and allow the taxpayer to stretch out the payments."

The caveat is that a filer has to have some source of income over that three to five years; unemployment insurance is not adequate," Ahrenholz said.

"A family member needs to have some income, even if its disability," he said. "We know disability will be there for the next three to five years."