Fresh Start Program

March 9, 2012 by staff 

Fresh Start Program, The IRS announced yesterday that its Fresh Start program will provide additional help for unemployed and self employed taxpayers with a six-month grace period on penalties and expanded income requirements for making installment payments on back taxes.

IRS Commissioner Doug Shulman said, “Our goal is to help people meet their obligations and get back on their feet financially.” With unemployment hovering at around 8% in Milwaukee, this program will help many individuals and families who can’t pay their full tax obligation, although it does not eliminate all interest and penalties.

Expanded grace period for penalties

Under Fresh Start, the failure-to-pay-penalty is forgiven for six months past the April 17, 2012 filing deadline for tax year 2011, to October 15, 2012. Tax payers still must file returns or a request for extension by the deadline, but do not need to remit payment with the return. The IRS will still charge 3 percent interest on back taxes, but removes the failure-to-pay penalty, which is half of 1 percent per month up to 25 percent.

Grace period qualifiers:
Income limitations are $200,000 if filing a married joint return, or $100,000 for single or head of household filers.
Calendar year 2011 tax balance due must not exceed $50,000.
Wage earners must have been unemployed at least 30 consecutive days during 2011 or in 2012 up to April 17, 2012.
Self-employed individuals must have experienced a minimum 25 percent reduction in business income in 2011, due to the economy.
Tax payers who are eligible for the penalty grace period must fill out form 1127-A for penalty relief, which can be filled out online, printed and then mailed to the address in the instructions by April 17, 2012.

Installment payments for back taxes

IRS streamlined installment agreements allow taxpayers to pay taxes in installments with reduced penalties and without submitting a Collection Information Statement financial review. These agreements are now available to taxpayers owing up to $50,000, and payments can be stretched out over several months or years, up to 72 months. The maximum time on installment agreements was previously 60 months, with a $25,000 back tax liability limit.

Those who are making payments on balances above the $50,000 threshold can participate in this portion of the Fresh Start program by paying down their balance due to $50,000 or less.

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