In 2012, the IRS expanded its Fresh Start Initiative to help taxpayers who are unable to pay their taxes because of financial constraints. The initiative also helps the IRS keep track of the number of tax default cases, as it encourages more taxpayers to pay their dues.
Below is a list of several reliefs available as part of the Fresh Start Initiative:
Penalty Relief
Eligible taxpayers have up to a six-month extension to pay taxes. The penalty for not paying by April 15 is waived until October 15. If, however, the taxpayer fails to pay the taxes beyond the revised date, a penalty is charged.
The penalty relief is available to two categories of taxpayers
- Wage earning individuals who have been unemployed for a minimum of 30 consecutive days.
- Individuals who experienced a dip of 25 percent or more in their income due to a slowdown.
Qualification Criteria
According to the IRS, if you are married and filing jointly, your adjusted gross income must not exceed $200,000. If your filing status is single, qualifying widower, head of household, or married filing separately, the adjusted gross income must not exceed $100,000. In addition, if you have an outstanding debt of more than $50,000, you will not be qualified to receive a waiver.
Installment Payment Plan
The IRS installment agreement allows taxpayers to pay their taxes, in installments, in a scenario where they are unable to pay in full. It also gives taxpayers more time to pay. The threshold for the maximum amount of debt against which an installment plan can be prepared has now gone up from $25,000 to $50,000, with the maximum term for the repayment of installments being six years. Though you need to pay less in penalties, the interest will continue to accrue on your outstanding dues.
Taxpayers can set up an installment agreement using the Online Payment Agreement without the IRS getting involved, though it is important that they pay the installments through automatic draft of their bank account.
Offer in Compromise (OIC)
After the expansion of the “Fresh Start” initiative, it has become easier for taxpayers to qualify for an Offer in Compromise as the IRS has relaxed the qualification standards. To apply for an OIC, the taxpayer needs to file Form 433-A (OIC) or Form 433-B (OIC), and deposit a non-refundable application fee of $186. If, however, the taxpayer qualifies under the Low Income Certification guidelines, they would not have to pay the application fee. In addition to the form and application fee, the taxpayer may also be asked to pay the first month’s installment or 20 percent of the settlement amount, at the time of filing.
To learn more about IRS Fresh Start Initiatives, Call Pairett CPA, PLLC at 940-498-7422.