The IRS is expanding its “Fresh Start” initiative for struggling taxpayers. (IRS News Release 2012-31)
Alert: The updated program provides new penalty relief to the unemployed and opens up installment agreements to more taxpayers.
The Fresh Start program was initiated by the IRS in 2008. Under the new provisions, taxpayers who have been unemployed for 30 days or longer can avoid failure-to-pay penalties. The IRS is also doubling the dollar threshold for taxpayers eligible for installment agreements.
New penalty relief
A six-month grace period on failure-to-pay penalties is available to qualified taxpayers. If you’ve requested an extension of time to pay, this tax relief for the 2011 tax year is allowed only if the tax, interest and any other penalties are paid in full by Oct. 15, 2012.
The new penalty relief is available to:
- Wage-earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return.
- Self-employed individuals who experienced a 25% or greater reduction in business income in 2011 due to the economy.
But the penalty relief is subject to certain income limits. Income for joint filers can’t exceed $200,000, while the limit for single filers is $100,000. In addition, a taxpayer’s balance due for 2011 can’t be more than $50,000.
Taxpayers must complete new Form 1127-A, Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship, to obtain the penalty relief.
Now, more taxpayers can use streamlined installment agreements to catch up on back taxes. Effective immediately, the threshold for using an installment agreement without having to supply the IRS with a financial statement rises from $25,000 to $50,000. This is a significant reduction in taxpayer burden.
Qualified taxpayers will be able to stretch out payment over six years. The maximum term for streamlined installment agreements has been raised to 72 months from the previous 60-month maximum.
Taxpayers seeking installment agreements exceeding $50,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). Taxpayers may also pay down their balance due to $50,000 or less to take advantage of this payment option.
Tip: The IRS website features other online resources that can help taxpayers meet their payment obligations.
Like what you've read? ...Republish it and share great business tips!
Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...
We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.
The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.
" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/31166/do-you-need-a-fresh-start-on-taxes "