IRS Simplifies Requirements To Resolve Unpaid Tax Debt

Owe Taxes? Check out the IRS’s “Fresh Start” Initiative

The Internal Revenue Service (IRS) wants taxpayers to be aware that the “Fresh Start” initiative has been expanded to help those who owe taxes. Below are 4 tips provided by the IRS:
1. Penalty relief Part of the initiative relieves some unemployed taxpayers from failure-to-pay penalties. Penalties are one of the biggest factors a financially distressed taxpayer faces on a tax bill. The Fresh Start Penalty Relief Initiative gives eligible taxpayers a six-month extension to fully pay 2012 taxes. Interest still applies on the 2012 taxes from April 17, 2013 until the tax is paid, but you won’t face failure-to-pay penalties if you pay your tax, interest and any other penalties in full by Oct. 15, 2013.

The penalty relief is available to two categories of taxpayers:

* Wage earners who have been unemployed at least 30 consecutive days
during 2012 or in 2013 up to this year’s April 16 tax deadline.

* Self-employed individuals who experienced a 25 percent or greater
reduction in business income in 2012 due to the economy.

To qualify for this penalty relief, your adjusted gross income must not exceed $200,000 if married filing jointly or $100,000 if your filing status is single, married filing separately, head of household, or qualifying widower. Your 2012 balance due can not exceed $50,000.

Taxpayers who qualify need to complete a new Form 1127A to request the 2012 penalty relief. The new form is available on or by calling 1-800-829-3676 (TAX FORM).
2. Installment agreements An installment agreement is a payment option for those who cannot pay their entire tax bill by the due date. The Fresh Start provisions give more taxpayers the ability to use streamlined installment agreements to catch up on back taxes and also more time to pay.

The new threshold for requesting an installment agreement has been raised from $25,000 to $50,000. This option requires limited financial information, meaning far less burden to the taxpayer. The maximum term for streamlined installment agreements has been raised to six years from the current five-year maximum.

If your debt is more than $50,000, you’ll still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). You also can pay your balance down to $50,000 or less to qualify for this payment option.

With an installment agreement, you’ll pay less in penalties, but interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, you must agree to monthly direct debit payments.

You can set up an installment agreement with the IRS through the On-line Payment Agreement (OPA) page at
3. Offer in Compromise Under Fresh Start in 2012, the IRS expanded the Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers and has simplified the information and documentation required on the Form 433 Financial Statement. An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.

The IRS recognizes many taxpayers are still struggling to pay their bills so the agency has been working on more common-sense changes to the OIC program to more closely reflect real-world situations.

Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

If you are facing tax issues or need assistance dealing with the IRS, call The Schreiber Law Firm at (619) 269-8600. The Schreiber Law Firm serves clients primarily in the areas of tax problem resolution, foreclosures, bankruptcy, short sales, and estate planning.
At The Schreiber Law Firm, you receive personalized, individual attention and you always speak to an attorney, not an assistant, regarding your case. The Schreiber Law Firm provides representation at a lower cost – in order to assist those who need help the most, but can afford it the least.
The contents of this blog are intended for general informational purposes only and should not be used or relied upon as legal advice or legal opinion on any specific facts or circumstances. You are encouraged to consult with the attorney concerning this information in this blog or any specific legal questions you may have.