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 (IRS News Release IR-2012-31). 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 17, 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.
“The first line of defense for many taxpayers is an installment agreement,” Anna Sachs, CPA, of the Greater Philadelphia Chapter of the Pennsylvania Institute of CPAs, told CCH. Taxpayers need to remember, however, that the IRS compounds interest daily. Thus, taxpayers should, if they are able, make as large an initial payment as possible under an installment agreement, Sachs recommended.
The IRS launched its Fresh Start initiative in early 2011 to help taxpayers buffeted 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.