The Federal Government recently announced a major expansion of its Fresh Start Program which was initiated last year to help taxpayers stuggling with tax debt. The recent changes supplement efforts that were already in place under the original Fresh Start Program to help individuals and businesses meet their tax obligations and reach tax settlements. Three major areas targeted by the recent Fresh Start expansion are penalty relief, Installment Agreements, and Offers in Compromise. The changes to these areas of tax relief are outlined below.
Penalty Relief
- What is the failure-to-pay penalty? The failure-to-pay penalty is an amount assessed by the IRS on any tax amount owed that is not paid by the filing deadline. It is usually assessed at the rate of one half of one percent per month with a maximum assessment of 25%. The failure-to-pay penalty is charged in addition to interest on the tax amount owed, which is usually three percent per year.
- What are the provisions of the expanded penalty relief initiative? The expanded penalty relief initiative grants a six month grace period on failure-to-file penalties for two specific categories of taxpayers provided all tax amounts, penalties, and interest are paid in full by October 15, 2012. The groups of taxpayers covered by this provision are workers who were unemployed for 30 consecutive days at any time during 2011 up until the April 17th filing deadline and self-employed individuals who experienced a decrease in income of 25% or more due to the downturn in the economy.
- What are the restrictions on the expanded penalty relief initiative? In order to be eligible for expanded penalty relief, a taxpayer who is married filing jointly must not have an income in excess of $200,000 and must not have a tax debt greater than $50,000. The income of a taxpayer who is filing as single or head of household must not exceed $100,000.
Installment Agreements
- What is an Installment Agreement? An Installment Agreement allows a taxpayer to pay the balance of a tax amount due in installments rather than paying the entire balance of the tax debt by the due date. While interest continues to accrue until the balance of the tax debt is paid in full, penalties are generally reduced during the payment period.
- What are the provisions of the expanded Installment Agreement initiative? The expanded Installment Agreement initiative reduces taxpayer burden by easing the restrictions placed on qualifying for a streamlined Installment Agreement. The streamlined Installment Agreement has the taxpayer advantage of not requiring a financial statement. Under the provisions of the expanded Fresh Start tax settlement initiative, the maximum tax debt allowable for a streamlined Installment Agreement is raised from $25,000 to $50,000, and the maximum term of the payment period is extended from 60 months to 72 months.
Offers in Compromise
- What is an Offer in Compromise? An Offer in Compromise is a tax settlement option that allows a taxpayer to settle a tax debt for less than the full amount owed.
- What are the provisions of the expanded Offer in Compromise initiative? The guidelines outlined by the expanded Offer in Compromise initiative make this tax settlement option available to a much larger group of taxpayers. Taxpayers with an annual income of up to $100,000 can now qualify for an Offer in Compromise. In addition, the maximum tax debt ceiling allowed for qualification has been raised from $25,000 to $50,000.
- What are the restrictions on the expanded Offer in Compromise initiative? While the recent expansion of the Fresh Start Program makes the Offer in Compromise tax settlement option available to a larger group of taxpayers, the IRS will generally not accept an Offer in Compromise if they believe the entire amount of the tax debt can be collected.
If you have an outstanding tax debt, we can help you determine whether you qualify for tax relief under the provisions of the Fresh Start Program. Following that determination, our experienced tax settlement professionals can help you submit your tax settlement request according to established IRS guidelines. For more information about our tax settlement services, visit us today at professionaltaxresolution.com. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.