The IRS “Fresh Start” initiative was introduced last year as a response to the inability of struggling taxpayers to pay their taxes. In 2012, the IRS is significantly expanding the program with two major additions.
First, there will be a new “failure-to-pay penalty relief” for two categories of taxpayers:
- 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 this year
- Self-employed individuals who experienced a 25 percent or greater reduction of business income in 2011 due to the economy
Under this new relief, taxpayers can avoid the failure-to-pay penalty until Oct. 15, 2012.To be eligible the taxpayer’s income must not exceed $200,000 for a joint return or $100,000 for a single or head of household return. Taxpayers meeting the eligibility criteria will need to complete a new Form 1127A in order to obtain the 2011 penalty relief.
In addition, there is a new provision that raises the threshold to $50,000 for using an installment agreement to pay back taxes without having to supply the IRS with a financial statement.The previous threshold had been $25,000. Taxpayers seeking installment agreements exceeding $50,000 will still be required to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F).The maximum term for installment agreements has also been raised to 72 months from the previous 60-month maximum. To set up an installment agreement with the IRS, go to the On-line Payment Agreement (OPA) page on IRS.gov and simply follow the instructions.