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The Internal Revenue Service has expanded its “Fresh Start” initiative to help struggling taxpayers who owe taxes.
The following tips explain the expanded relief for taxpayers.
Penalty Relief Part.
The penalty relief part of the initiative relieves some unemployed taxpayers from failure-to-pay penalties.
IRS Penalties are one of the biggest factors a financially distressed taxpayer faces on a tax bill.The Fresh Start Penalty Relief Initiative gives eligible taxpayers a six-month extension to fully pay 2011 taxes. Interest still applies on the 2011 taxes from April 17, 2012 until the tax is paid, but you won’t face failure-to-pay penalties if you pay your tax, interest and any other penalties in full by Oct. 15, 2012.
The penalty relief is available to two categories of taxpayers:
1. Wage earners who have been unemployed at least 30 consecutive days
during 2011 or in 2012 up to this year’s April 17 tax deadline.
2. Self-employed individuals who experienced a 25 percent or greater
reduction in business income in 2011 due to the economy.
To qualify for this penalty relief, your adjusted gross income must not exceed $200,000 if married filing jointly or $100,000 if your filing status is single, married filing separately, head of household, or qualifying widower.
Important qualification – Your 2011 balance due can not exceed $50,000.
Installment agreements. An installment agreement is a payment option for those who cannot pay their entire tax bill by the due date. The Fresh Start provisions give more taxpayers the ability to use streamlined installment agreements to catch up on back taxes and also more time to pay.
The new threshold for requesting an installment agreement has been raised from $25,000 to $50,000.
This new tax option requires limited financial information, meaning far less burden to the taxpayer. The maximum term for streamlined installment agreements has been raised to six years from the current five-year maximum.
If your debt is more than $50,000, you’ll still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F).
You have the option that you can pay your balance down to $50,000 or less to qualify for this payment option.
With an installment agreement, you’ll pay less in penalties, but interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, you must agree to monthly direct debit payments.
Under the first round of Fresh Start in 2011, the IRS expanded the Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.
An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.
An offer in compromise will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay. Before one even contemplates filing an offer in compromise it is a best practice to also have a tax professional qualify your case for the filing of an offer to compromise tax debt settlement.
There are many companies out there that are scrupulous and fraudulent in nature who will take the monies of tax payers and tell them they can settle their cases for pennies on a dollar.
Before you give your money to any tax professional make sure they are well qualified in offers in compromise. As a former IRS agent I can’t tell you the volumes of fraudulent and frivolous offers I have seen filed. Choose your tax professional wisely. that’s why it is best to use former IRS agents who know the tax policies, tax codes, and IRS settlement procedures. I myself was a former IRS agent teaching instructor.
Miami, Ft.Lauderdale, Back Taxes Help, Former IRS AgentsView all posts by Michael Sullivan →