Are you struggling to pay back taxes, IRS interest or tax penalties? The IRS has announced a new initiative to help struggling taxpayers who owe the IRS back taxes, penalties and/or interest on their tax debt. The Internal Revenue Service has effected a major expansion of it’s “Fresh-Start” program that will provide new penalty relief to the unemployed and making tax installment agreements available to more taxpayers.

The expansion calls for certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties. They are also doubling the the dollar threshold for taxpayers eligible for installment agreements.

The tax penalty relief is a six-month grace period on failure-to-pay penalties will be made available to certain wage earners and self-employed individuals. The request for an extension of time to pay will result in relief from the failure to pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by Oct. 15, 2012.

The penalty relief will be available to two categories of taxpayers:

• Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 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.

This tax penalty relief is subject to income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly or not exceed $100,000 if he or she files as single or head of household. This penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

The tax installment agreement states that effective immediately, the threshold for using an installment agreement without having to supply the IRS with a financial statement has been raised from $25,000 to $50,000. This is a significant reduction in taxpayer burden.

Taxpayers who owe up to $50,000 in back taxes will now be able to enter into a streamlined agreement with the IRS that stretches the payment out over a series of months or years. The maximum term for streamlined installment agreements has also been raised to 72 months from the current 60-month maximum.

The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place more common-sense changes to the Offers In Compromise (OIC) program to more closely reflect real-world situations.

So how do you get a fresh start from the IRS? By taking advantage of the tax penalty relief and tax installment agreements offered by the IRS.

For more on tax penalty relief, tax installment agreements, Offers In Compromise or other tax related issues, visit the IRS website.

There’s a new income tax scam you should be aware of.  The IRS is warning taxpayers, especially senior citizens, to beware of a scheme tempting them to file tax returns claiming fraudulent refunds.

The scheme promises tax refunds to people who have little or no income and normally don’t have a tax filing requirement.  They claim they can obtain a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit.

The IRS has seen a surge of these scam from all across the United States. They are aggressively investigating the source of the scheme

“This is a disgraceful effort by scam artists to take advantage of people by giving them false hopes of a nonexistent refund,” said IRS Commissioner Doug Shulman. “We want to warn innocent taxpayers about this new scheme before more people get trapped.”

In many of these cases, con artists are targeting seniors, people with very low incomes and members of church congregations, with promises of free money. They claim refunds are available even if the victim went to school decades ago.

The IRS has already detected and stopped thousands of these fraudulent claims. Nevertheless, the scheme can still be quite costly for victims. Promoters may charge exorbitant upfront fees to file these claims and are often long gone when victims discover they’ve been scammed.

Taxpayers need to remain vigilant regarding tax schemes.

The Internal Revenue Service owes taxpayers more than $1 billion dollars in tax refund money. They actually owe taxpayers way more than that. This $1 billion is the estimated tax refunds for taxpayers who haven’t filed their 2008 income tax return. This is a situation that occurs every tax year.

Taxpayers who haven’t filed a 2008 tax return can do so without penalty, but your time is drawing short. IRS tax law requires that the tax return be properly addressed, mailed and postmarked by April 17, 2012. Taxpayers will be happy to note that the IRS does not levy a tax, penalty or any additional fee for filing a late return qualifying for a refund.

The Internal Revenue generally offers a three year grace period. After that, a giant vacuum is used to suck your money back for use by the government. That money is gone forever and you can never get it back.

The IRS estimates that half of the tax refund amounts are over $600.00.

California leads all states with 122,500 individuals who haven’t filed their 2008 tax return that are due over $122 million. At the other end of the spectrum is the state of Vermont with 1,700 individuals due of $1.4 million.

Why have so many Americans failed to file their 2008 income tax return? The Internal Revenue Service theorizes that some taxpayers didn’t file because they didn’t enough money to require filing a tax return, even though they may have had taxes withheld from their wages.

Here’s an warning to taxpayers who expect a tax return for the 2008 tax year but haven’t filed their tax return in subsequent years. So, even if you are due a tax refund, and you file before April 17, 2012, your check may be held by the IRS. If you have any outstanding debt with the IRS, the amount due will be deducted from the amount you receive. The same goes for any debt you owe for child support and student loans.

There is something very important you need to know if you feel you qualify for a 2008 income tax refund. You stand to lose more than just your tax refund. Your tax refund amount could signficantly increase if your qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were:

$38,646 ($41,646 if married filing jointly) for those with two or more qualifying children,
$33,995 ($36,995 if married filing jointly) for people with one qualifying child, and
$12,880 ($15,880 if married filing jointly) for those with no qualifying children.
For more information, visit the EITC Home Page on IRS.gov.

If you have any questions about how to file your 2008 federal income tax return, visit the IRS website or call 1-800-829-1040 Monday to Friday 7:00 a.m. to 7:00 p.m your local time.

source: irs.gov