In March 2012, the IRS expanded its “Fresh Start Initiative” to help struggling taxpayers who owe taxes. The IRS provided relief in three areas including:
1. Penalty Relief: The IRS is providing a six month extension to fully pay 2011 taxes for eligible unemployed taxpayers. Interest still applies from April 17, 2012, until the tax is paid, but taxpayers won’t face failure to pay penalties if taxes, interest and other penalties are paid in full by October 15, 2012.
2. Installment Agreements: The Fresh Start Initiative provisions are giving taxpayers the ability to use streamlined installment agreements to catch up on back taxes. The new threshold for requesting an installment agreement has been raised from $25,000 to $50,000 and the repayment period has been extended to six years from the current five year maximum. If you owe more than $50,000 you will have to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). Under this program you must agree to direct debit payments.
3. Offer in Compromise: Under the first round of the Fresh Start Initiative in 2011, the IRS expanded the program to cover a larger group of struggling taxpayers. Generally, an offer will not be accepted if the IRS believes they can collect the liability in full during the statutory collection period. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.