How Do You Spell “Tax Relief?”

For Immediate Release

Contact: Gigi Thompson Jarvis
gjarvis@naea.org, 202.822.6232, x11

download a Word version of this press release

How Do You Spell “Tax Relief?”

It Starts with “IRS.”

WASHINGTON, DC (March 15, 2012)—IRS has announced a major expansion of the “Fresh Start” initiative that was launched in 2008 to help taxpayers in trouble.

The new, broader effort will allow certain taxpayers who have been unemployed for 30 days or longer to avoid paying penalties for failing to pay taxes. IRS has also greatly increased the number of taxpayers eligible for installment agreements by doubling the dollar threshold, and is working to make common-sense changes to the Offer in Compromise program.

“Many delinquent taxpayers haven’t filed because they don’t have the money to pay, and then they’re socked with both the failure-to-file and failure-to-pay penalties,” said Alan Pinck, EA of A. Pinck and Associates of San Jose, CA. “Often they don’t realize that they can reduce their penalties by filing even if they can’t pay. This latest effort is going to help a lot of struggling taxpayers.”

This year, certain wage earners and self-employed taxpayers will be able to avoid paying any penalties for late payment of 2011 taxes so long as they have filed an extension and have paid the full tax, interest and any other penalties by the October 15, 2012 extension deadline. Eligible for the penalty relief are wage earners who have been unemployed for at least 30 consecutive days in 2011 or 2012 up until the April 17 federal tax deadline, and self-employed individuals whose business income has dropped 25 percent or more during 2011. Taxpayers whose annual incomes exceed $200,000 for married filing jointly, or $100,000 for those filing single or as head of household, are not eligible for the expanded penalty relief. Also ineligible are taxpayers who owe more than $50,000 for calendar year 2011.

The increase in the dollar threshold for eligibility for an installment agreement without supplying IRS with a financial statement means that taxpayers who owe up to $50,000 in back taxes may be able to catch up by making a series of payments over months or years. Another expansion of the Fresh Start program increases the repayment term from a maximum of 60 months to 72 months.

Pinck adds, “It’s important for taxpayers with installment agreements to be aware that during the period that they are paying off their tax debts with monthly direct debit payments, interest continues to accrue on the outstanding debt. And, they must stay current with their payments going forward -- if they fall behind, the agreement becomes void.”

IRS has also expanded the Offer in Compromise program, an agreement between IRS and the delinquent taxpayer that allows the debt to be settled for less than the full amount owed. More information on these initiatives can be found on the IRS website, or by contacting a licensed tax specialist, such as an enrolled agent (“EA”), who can help get you out of tax trouble and keep you there. EAs are tax experts licensed by the US Department of the Treasury. To earn the EA license, candidates must pass a background check and a stringent three-part exam on tax. To maintain the license, they must complete annual continuing education that is reported to the IRS. Members of the National Association of Enrolled Agents (NAEA) are obligated to complete additional continuing education and adhere to a code of ethics and rules of professional conduct.  To locate an enrolled agent in your area, go to the “Find an EA” directory at www.naea.org.