IRS Efforts to Help Struggling Taxpayers

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After announcing its “fresh start” program in 2011, the IRS expanded that program in 2012, in an effort to help struggling taxpayers start over with a clean slate as far as their taxes are concerned. The fresh start program helped taxpayers who were burdened with tax liens and outstanding tax bills take care of those issues, which in turn increased their credit scores and helped them purchase homes or vehicles.

The original program in 2011 included: increasing the dollar threshold of lien implementation, making it simpler for taxpayers to obtain a lien withdrawal once a tax bill was paid, withdrawing a lien once the taxpayer entered into an installment agreement, creating easier access to installment agreements for small businesses and expanding Offer in Compromise programs so that more taxpayers could be helped. In 2012, the IRS added such relief as:

  • Penalty relief for unemployed taxpayers. Since penalties are one of the biggest factors a financially distressed taxpayer may face on their tax bill, penalty relief was offered to self-employed individuals who experienced a 25% or larger reduction in business income due to the economy, and taxpayers who were unemployed for at least 30 consecutive days, in 2011 through April 2012. Taxpayers who have an adjusted gross income greater than $200,000 (if married filing jointly), and $100,000 (if single), do not presently qualify for the tax penalty relief.
  • More taxpayers will have the ability to take advantage of IRS installment agreements, in order to catch up on back taxes, as well as more time to pay. The threshold for taking part in an installment agreement has been raised from $25,000 to $50,000, and requires much less financial information. The five-year maximum term has also been raised to six years.
  • A more streamlined Offer in Compromise program allows taxpayers with incomes up to $100,000 to participate. Such compromise offers will generally not be accepted if the IRS has reason to believe the tax liability can be paid in full, either as a lump sum or through a payment agreement.

There are many things taxpayers can do to make dealing with the IRS—and paying their back taxes in a timely manner—simpler. Taxpayers who receive a bill for past due taxes may be better off borrowing the money and paying the taxes in full, if an offer in compromise is not possible. This is because of the interest and penalties which will continue to accrue so long as the taxes are outstanding.

Depending on your particular circumstances, you may be eligible for additional time to pay your tax debt in full by filling out a payment agreement application at www.irs.gov. It could also be wise to pay your debt with a credit card, depending on the interest rate of your card. If you are unable to pay your tax liability in full, then you may be eligible for a payment plan in which you make regular, monthly payments. To take advantage of this installment plan you must file all returns and be current with your estimated tax payments.

Even if you owe more than $25,000, you may still qualify for an installment agreement, however you will be required to complete Form 433F, Collection Information Statement, before the IRS will consider such an agreement. While the IRS may not point this out, you will also pay a one-time user fee once your installment agreement is approved, in the amount of $105. Taxpayers with lower incomes may qualify to have that amount dropped to $43.

For taxpayers with outstanding tax debt, it could be helpful to speak with a knowledgeable Louisiana tax attorney such as Paul A. Grego. There are many issues surrounding tax debt, and it can be overwhelming to try and sort it all out. The Law Office of Paul A. Grego has the experience and the knowledge necessary to help you resolve your tax issues. Call 504-302-4949 today or visit our website for additional information.