The IRS, under the Fresh Start Initiative, provides a number of relief options to financially-distressed taxpayers.
The initiative allows eligible taxpayers up to a 6-month extension to pay their taxes. The penalties for not paying income tax by April 15 is waived off until October 15. If, however, the taxpayer fails to pay the taxes beyond the revised date, a penalty is charged.
The penalty relief is available to two categories of taxpayers
Wages earning individuals who have been unemployed for a minimum of 30 consecutive days.
If you are married and filing jointly, your adjusted gross income must not exceed $200,000. If your filing status is single, qualifying widower, head of household, or married filing separately, the adjusted gross income must not exceed $100,000. In addition, if you have an outstanding of more than $50,000, you will bot be qualified to receive a waiver.
2. IRS Installment Payment Plan
The IRS Installment Agreement provision allows taxpayers to pay their taxes, in installments, in a scenario wherein they are unable to pay in full. It also gives taxpayers more time to pay. The threshold for the maximum amount of debt against which an installment plan can be prepared has now gone up from $25,000 to $50,000, with the maximum term for the repayment of installments being 6 years. Though you need to pay less in penalties, the interest will continue to accrue on your outstanding dues.
Taxpayers can set up an installment agreement using the Online Payment Agreement without any intervention of an IRS assistor. It is, however, essential that they agree to pay the installments through a direct debit mode.
3. Offer in Compromise (OIC) - IRS Settlement
The Offer in Compromise program allows taxpayers to settle their outstanding income taxes for less than what they actually owe to the IRS. After the expansion of “Fresh Start” initiative, it has become easier for taxpayers to qualify for an Offer in Compromise, as the IRS has relaxed the qualification standards, and therefore, more people are now eligible for an IRS settlement.
To apply for an Offer in Compromise (OIC), the taxpayer needs to file Form 433-A (OIC) or Form 433-B (OIC), and deposit a non-refundable application fee of $186. If, however, the taxpayer qualifies under the Low Income Certification guidelines, they would not have to pay the application fee. In addition to the form and application fee, the taxpayer may also be asked to pay the first month’s installment or 20 percent of the settlement amount, at the time of filing.