SOUTH BEND — It's a new approach from Uncle Sam. With job losses mounting and the economy on shaky ground, the IRS has a new option on this year's tax return: flexibility.

Taxpayers have traditionally been able to pay in "installments," but adopting a payment plan hasn't been a commonplace option in the past.

But, this year, Internal Revenue Service Commissioner Doug Schulman issued a different message to taxpayers worried they won't be able to Uncle Sam his due: don't panic.

It's a message Ken Stacy took with him to South Bend's main post office branch on Wednesday.

"I know I'm going to owe money. I just don't know how much," Stacy said, his application for an extension on his 2008 tax return in hand.

This year, Stacy says filing his return has been extremely difficult.

8 months ago, he lost his job as a salesman. Now, he and his family are living off his retirement savings.

"I'm living off my 401k. And, I know in those situations, you get penalized [on your tax return,]" he said.

It made the thought of cutting a check to the IRS even harder to bear.

"[To pay the full amount] right now, it would be very tough. I wouldn't be able to," he said.

He isn't alone.

At H & R Block's branch on Portage Avenue in South Bend, accountants heard a common question on tax day: what if I can't pay?

"We've had people in all day, and sometimes they've had to wait. And, a lot of them are unemployed people who are anxious to get their money back because they need it. But there are also a lot of people who can't afford to pay what they owe," said H & R Block South Bend Office Manager Martha Burns.

And the questions aren't just coming from those without a job.

Lockrett Heflin still has a steady paycheck from her position at Brown Mackie College.

But, that didn't make cutting her tax return check this year any easier.

"It's $585," she said. "I didn't expect that. It was very hard to swallow this year. So, I'm filing an extension. But, I'm also sending in what I can now. It's very tough, though. It takes a big chunk out of your paycheck."

They are stories the IRS has heard before.

But, this year, the response is a little different.

"There has been additional flexibility given to IRS employees in dealing with folks who owe taxes. If they owe, they have the opportunity of working with us to develop an installment agreement plan, where they can pay their taxes back in installments," said South Bend based IRS Senior Tax Specialist Charles Barrington.

"The entire federal government is beginning to understand that there is a sensitivity we need to have [about] the economy and what people are facing right now. We are willing to sit down and work with taxpayers to do this in the way that will accommodate their needs, given the economy as it is right now," Barrington continued.

With the economy still in shambles, the IRS has promised to be kinder and gentler to those who are struggling to pay their tax bills. The agency is offering to waive late penalties, negotiate new payment plans and postpone asset seizures for delinquent taxpayers who make a good-faith effort to settle their federal tax debts.

Taxpayers can apply for a payment plan by filling out a Form 9465. If your debt to the IRS is less than $25,000, you can also set up an installment plan online at www.irs.gov.

But there is a catch.

File late, and you're out of luck.

Agents will continue to impose stiff penalties on those who simply neglect to file an income tax return.

"The main thing they want to do is be sure to file on time, if they owe. Then, if they owe, they have the opportunity of working with us to develop an installment agreement plan," said Barrington.

Taxpayers who don't file returns or extensions by midnight on April 15 face penalties of 5% per month on any unpaid taxes, up to a maximum of 25 percent.

For taxpayers with small outstanding tax bills, there is a minimum penalty of $135, or 100% of the unpaid taxes--whichever is smaller. For example, if you owe $100 and don't file a tax return, the penalty is $100, plus payment in full on the taxes you already owe.

You'll also owe interest on the unpaid amount. The government is currently charging a 3% annual interest rate, compounded daily.

If you file a return but cannot pay all you owe, the penalty is just 0.5% of the unpaid taxes per month. That's 1/10th of the penalty for not filing, plus interest.

Taxpayers with installment agreements must still pay penalties on the unpaid balance, but they are reduced to 0.25% per month.

It may sound complicated, but it all adds up to a big lifesaver for Stacy.

"It's the only thing I can do," he said. "If they have something I can work with, that's better than nothing. [If they don't,] I guess they come see me."

The Associated Press contributed to this report.