The IRS recently announced two key intitiatives to help struggling taxpayers make ends meet: (1) reduction in failure to pay penalties for unemployed taxpayers, and (2) a significantly easier installment agreement application process for tax payment plans.
A six-month grace period on failure-to-pay penalties (one half percent per month) will be made available to:
- Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to April 17 2012.
- Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.
Taxpayers may complete Form 1127A. The IRS is still legally required to charge interest on unpaid taxes (currently 3 percent per year) and failure-to-file penalties (up to 25 percent) if you do not file or are granted an extension request.
This penalty relief is subject to income limits ($200,000 for married filing jointly or $100,000 as single) and is also restricted to taxpayers whose tax balance does not exceed $50,000. The threshold for using an installment agreement – a payment plan whereby penalties are reduced - without having to supply the IRS with a financial statement has been raised to $50,000 (from $25,000), significantly reducing the burdensome application process.
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