The deadline to file taxes with the IRS is just over one month away. People can face significant penalties and interest for failing to file returns and failing to pay taxes by the appropriate deadline. But Orange County taxpayers should know that the IRS has initiated new developments this year under its “Fresh Start” program that could ease the burden on those having difficulty filing and paying their taxes.
The IRS’s relief efforts are aimed at the penalty assessed for failing to pay taxes timely. Recognizing that many people have endured financial hardship during the past year, the IRS will grant a six-month extension to qualifying taxpayers who apply. During the six-month period they can pay, without penalty, taxes that they owe to the IRS for 2011. To qualify, a person must have been either self-employed and endured at least a 25 percent decrease in their business’s 2011 income, or have been unemployed from a wage-earning job for at least 30 days in a row in 2011 or in 2012.
The IRS has also imposed monetary limits on who can receive the extension. Anyone who has a 2011 balance owed greater than $50,000 cannot qualify. In addition, taxpayers with incomes greater than $100, 000 or $200,000 if married filing jointly are ineligible. Those who do qualify, however, will have until Oct. 15, 2012 to pay their taxes, along with any other penalties and interest outstanding. But if the amount is not paid in full by that time, the IRS can assess a failure to pay penalty.
Although the IRS’s changes for this year may help many taxpayers, it is important to note that the IRS will still assess interest on any unpaid taxes and it will not alter penalties for failing to file a tax return by the correct deadline.
Source: Internal Revenue Service, “IRS Offers New Penalty Relief and Expanded Installment Agreements to Taxpayers under Expanded Fresh Start Initiative,” IR-2012-31, Mar. 7, 2012.