IRS Expands Its Fresh Start Initiative; Provides Penalty and Installment Payment Relief
by Michael W. Blitstein, CPA The IRS announced enhancements to its “Fresh Start” initiative by providing higher dollar thresholds for using the streamlined application process for installment agreements and new penalty relief for qualified individuals affected by the economy in 2011. The IRS doubled the dollar threshold amount and increased the maximum term for streamlined installment agreements. Unemployed taxpayers, if they file their returns after April 17th, and the self-employed may be eligible for late payment penalty relief. The agency has updated its online materials about the Fresh Start initiative to reflect the new relief. Fresh Start The IRS launched its Fresh Start initiative in early 2011 to help taxpayers affected by the economic slowdown. The IRS modified its lien policies by increasing the lien-filing threshold to $10,000 from $5,000 and by creating a process in which a lien will be released if the taxpayer qualifies for a direct-debit installment agreement. Additionally, it eased and streamlined installment agreements to make them available to more small businesses. Small businesses with an outstanding tax liability balance of $25,000 or less are able to apply for an installment agreement without providing a financial statement and financial verification. Additionally, they could apply for up to 60 months to pay off their outstanding tax liability. Installment Agreements Effective immediately, the IRS has raised the threshold amount for using the streamlined installment agreement without having to provide a financial statement or verification from an outstanding tax liability of $25,000 or less to a balance due of $50,000 or less. The agency also increased the maximum term for streamlined installment agreements from the current 60 months to 72 months. Taxpayers must agree to direct-debit payments. Under the Direct Debit Installment Agreement (DDIA) system, funds are automatically debited from a taxpayer’s bank account for the agreed upon installment amount. Taxpayers should file Form 9465-F, Installment Agreement Request, but do not need to provide a financial statement, Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-F, Collection Information Statement. Taxpayers seeking installment agreements exceeding $50,000 will still need to furnish a financial statement. Taxpayers must also pay down their balance due if over $50,000 to take advantage of the expanded streamlined program. Penalty Relief Taxpayers normally have until April 17, 2012, to file their 2011 tax returns and pay any tax due. Taxpayers requesting an extension of time to file have until October 15, 2012, to file their 2011 returns. This year, certain unemployed and self-employed taxpayers may be eligible for a six-month grace period on failure-to-pay penalties. Penalty relief is available to the following two groups of taxpayers:
- Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17th deadline for filing a Federal tax return this year.
- Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.
CJBS, LLC is a Chicago based firm that assists its clients with a wide range of accounting and financial issues, protecting and expanding the value of mid-size companies. E-mail me at if you have any questions about this posting or if I may be of assistance in any way. cjbs.com
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