Action Line: IRS offers relief to strapped taxpayers
BY PHIL MULKINS World Action Line Editor
Thursday, April 12, 2012
4/12/12 at 6:02 AM
Read other stories
to help you with
your 2011 tax
Dear Action Line: What do I do when I owe federal taxes but can't afford to pay them? - C.T., Broken Arrow.
The Internal Revenue Service has expanded its "Fresh Start" initiative tulsaworld.com/IRSFreshStart to help struggling taxpayers owing taxes, said IRS spokesman David Stell.
Penalty relief: This is available to two categories of taxpayers: wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to this year's tax deadline, which is Tuesday; and self-employed individuals experiencing a 25 percent or greater reduction in business income in 2011 due to the economy.
Qualifying: To qualify, 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 2011 balance due can not exceed $50,000. Taxpayers who qualify need to complete a new Form 1127A tulsaworld.com/IRSForm1127A "Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship." This is also available at (800) 829-3676.
Installment agreements: This is a payment option for those who cannot pay their entire tax bill by the due date and gives 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 is $50,000. This option requires limited financial information, meaning far less burden. The maximum term is six years.
Information collection statement: If your debt is more than $50,000, you'll still need to supply a Collection Information Statement (Form 433-A tulsaworld.com/IRSForm433A or Form 433-F tulsaworld.com/Form433F). 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.
Offer in Compromise: The IRS expanded this to cover a larger group of struggling taxpayers. OIC 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 it worked on more common-sense changes to more closely reflect real-world situations.
No OIC: 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 income and assets to make such determinations. See tulsaworld.com/IRSOIC
IRS collections: A series of eight short videos are available: "Owe Taxes? Understanding IRS Collection Efforts" is available at tulsaworld.com/IRScollection
Original Print Headline: IRS offers relief to strapped taxpayers
Submit Action Line questions by calling 918-699-8888, emailing phil.mulkins@TulsaWorld.com or by mailing them to Tulsa World Action Line, PO Box 1770, Tulsa OK 74102-1770.