|March 2012 News Update from www.jcoggincpa.com|
|2012-03 Newsletter - IRS Announces Major Expansion of "Fresh Start" Initiative|
IRS Commissioner Doug Shulman announced a major expansion of the "Fresh Start" initiative in a press release dated March 7th, 2012. The Fresh Start initiative, first introduced in 2008 as a part of a larger program to help taxpayers address their tax liabilities, assists qualified taxpayers in three major areas: penalty relief, installment agreements, and offers in compromise.
Late-payment penalties (0.5% per month of the unpaid tax amount up to a maximum of 25%) are abated until October 15, 2012 as long as the tax, interest and any other penalties are paid by that date. Certain wage earners and self-employed individuals are given a six-month grace period for failure-to-pay penalties. The penalty relief will be available to wage earners who were unemployed for at least 30 consecutive days during 2011 or in 2012 (up to the April 15, 2012) and self-employed individuals who experienced a 25% or greater reduction in 2011 business income (compared to 2010) due to the economic downturn.
A qualifying taxpayer filing as single or head of household may not have Adjusted Gross Income (AGI) greater than $100,000. Married taxpayers who file jointly do not qualify if their AGI is more than $200,000. This penalty relief is restricted to taxpayers whose calendar year 2011 balance due (taxes owed less payments and withholding) does not exceed $50,000.
Tax returns must be filed timely. This means taxpayer(s) must file their returns by April 17, 2012 or file for an extension to October 15, 2012. Failure-to-file penalties will not be waived. New form 1127-A must be filed to qualify for relief.
The Fresh Start provisions also allow more taxpayers to qualify for installment agreements to pay taxes owed. Effective immediately, taxpayers owing taxes of $50,000 (double the previous threshold of $25,000) or less can begin an installment agreement without supplying the IRS with a financial statement. Qualified taxpayers who cannot pay the entire amounts owed by the due date may enter into a payment plan extending payments up to a maximum term of seventy-two months. Although penalties are reduced, interest continues to accrue on the outstanding balance. In addition, taxpayers must agree to monthly direct debit payments. Taxpayers can set up an agreement online atwww.irs.gov by going to the online payment agreement (OPA) page and following the instructions.
Offers in Compromise
Liberalized rules for offers in compromise (agreements between taxpayers and the IRS to settle a taxpayer?s liability for less than the full amount owed) as set forth in the earlier Fresh Start remain in effect. Those changes allow more taxpayers to qualify and allow for some changes to the program to more closely reflect real-world situations.
According to Mr. Shulman, the changes to the Fresh Start initiative reflect the IRS? obligation to assist taxpayers struggling to pay their bills. "Our goal is to help people meet their obligations at get back on their feet financially," Shulman said. If you have questions about the Fresh Start Initiative and how it may apply to your financial situation, please give us a call
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