Unemployed Tax Relief
March 8, 2012 by staff
Unemployed Tax Relief, The IRS is offering some relief to taxpayers struggling to pay their taxes due to unemployment or a significant loss of income. The agency said Wednesday it will give certain taxpayers a six-month grace period on “failure-to-pay” penalties, which are typically assessed each month a taxpayer is late paying their taxes.
Without the grace period, a taxpayer who is late paying their taxes initially incurs a fee of 0.5% of their tax bill. That fee may increase the later they become — with a cap of 25%. But now some taxpayers won’t incur any fees until Oct. 15.
Even though taxpayers won’t get hit with the penalty, they will still accrue interest during the six-month period. Over the course of a year, that amounts to about 3% of the annual tax bill.
Taxpayers who qualify for this grace period must have been unemployed for 30 consecutive days or longer during 2011 or 2012 — up to the April 17 filing deadline this year. Self-employed taxpayers who saw their business income drop 25% or more due to the economy are also eligible.
There is an income limitation, however. Married taxpayers who file jointly cannot claim income that exceeds $200,000, while a taxpayer who files as single or head of household must not exceed $100,000 in income. Those who are still eligible for the relief will need to complete Form 1127A, available on the IRS website.
“We have an obligation to work with taxpayers who are struggling to make ends meet,” said IRS Commissioner Doug Shulman.
In addition to the penalty relief, the IRS is also allowing more taxpayers to spread out payments on their tax bills. Taxpayers with bills as high as $50,000 are now eligible for installment payments — up from a previous cap of $25,000. And these taxpayers aren’t required to file a financial statement to do so.
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