IRS Fresh Start Program Helps Those Who Owe Delinquent Taxes

Fresh Start Program Helps Those Who Owe the IRS

The IRS Fresh Start program makes it easier to pay back taxes and avoid tax liens. Even small business taxpayers may benefit from Fresh Start. 

Here are three important features of the Fresh Start program:

• Tax Liens.  The Fresh Start program increased the amount that taxpayers can owe before the IRS generally will file a Notice of Federal Tax Lien to $10,000. (However, in some cases, the IRS may still file a lien notice on amounts less than $10,000.)

When a taxpayer meets certain requirements and pays off their tax debt, the IRS may now withdraw a filed Notice of Federal Tax Lien. But you must request this in writing using Form 12277, Application for Withdrawal.

Some may qualify to have their lien notice withdrawn if paying their tax debt through a Direct Debit installment agreement. This too must be request in writing by using Form 12277.  However, if you default on the Direct Debit Installment Agreement, the IRS may file a new Notice of Federal Tax Lien and resume collection actions.

• Installment Agreements.  The Fresh Start program expanded access to streamlined installment agreements. Now, individual taxpayers who owe up to $50,000 can pay through monthly direct debit payments for up to 72 months (six years). While the IRS generally will not need a financial statement, they may need some financial information from you. The easiest way to apply for a payment plan is to use the Online Payment Agreement tool at IRS.gov. If you don’t have Web access you may file Form 9465, Installment Agreement, to apply.  

If you need an installment agreement for a tax debt of more than $50,000 or need a repayment term longer than six years - a financial statement will be required. In these cases, the IRS may ask for one of two forms: either Collection Information Statement, Form 433-A or Form 433-F.

• Offers in Compromise.  An Offer in Compromise is an agreement that allows you to settle your tax debt for less than the full amount. Fresh Start expanded and streamlined the OIC program. The IRS now has more flexibility when analyzing your ability to pay. This makes the offer program available to a larger group. 

Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable period of time. The IRS will not accept an offer if it believes that you can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the your income and assets, to make a decision regarding the your ability to pay. (Use the Offer in Compromise Pre-Qualifier tool on IRS.gov to see if you may be eligible for an OIC.)

Additional IRS Resources:

• Online Payment Agreement tool

• Fresh Start Notice of Federal Tax Liens

• Form 12277, Application for Withdrawal

• Understanding a Federal Tax Lien

• Offer in Compromise Pre-Qualifier tool

• Offer in Compromise

• Electronic Payment Options Home Page

• Payments (payment options)

IRS YouTube Videos:

• Online Payment Agreement 

IRS Podcasts:

• Online Payment Agreement 

Missed the Tax Deadline?

Missed the Tax Deadline?

Here is some advice for those who missed the tax filing deadline.

• File as soon as possible.  If you owe federal income tax, you should file and pay as soon as you can to minimize any penalty and interest charges. There is no penalty for filing a late return if you are due a refund.

• Penalties and interest may be due.  If you missed the April 15 deadline, you may have to pay penalties and interest. The IRS may charge penalties for late filing and for late payment. The law generally does not allow a waiver of interest charges. However, the IRS will consider a reduction of these penalties if you can show a reasonable cause for being late.

• E-file is your best option.  IRS e-file programs are available through Oct. 15. E-file is the easiest, safest and most accurate way to file. With e-file, you will receive confirmation that the IRS has received your tax return. If you e-file and are due a refund, the IRS will normally issue it within 21 days.

• Free File is still available.  Everyone can use IRS Free File. If your income is $57,000 or less, you qualify to e-file your return using free brand-name software. If you made more than $57,000 and are comfortable preparing your own tax return, use Free File Fillable Forms to e-file. This program uses the electronic versions of paper IRS forms. IRS Free File is available only through IRS.gov.

• Pay as much as you can.  If you owe tax but can’t pay it all at once, you should pay as much as you can when you file your tax return. Pay the remaining balance due as soon as possible to minimize penalties and interest charges.

• Installment Agreements are available.  If you need more time to pay your federal income taxes, you can request a payment agreement with the IRS. Apply online using the IRS Online Payment Agreement Application tool or file Form 9465, Installment Agreement Request.

• Refunds may be waiting.  If you’re due a refund, you should file as soon as possible to get it. Even if you are not required to file, you may be entitled to a refund. This could apply if you had taxes withheld from your wages, or you qualify for certain tax credits. If you don’t file your return within three years, you could forfeit your right to the refund.

IRS Resources:
• IRS Free File
• E-file Options
• Make a Payment – payment options
• Online Payment Agreement tool
• Form 9465, Installment Agreement Request

Missing Your W-2? Here’s What to Do

Missing Your W-2? Here’s What to Do

It’s a good idea to have all your tax documents together before preparing your 2012 tax return. You will need your W-2, Wage and Tax Statement, which employers should send by the end of January. Give it two weeks to arrive by mail.

If you have not received your W-2, follow these three steps:

1. Contact your employer first.  Ask your employer – or former employer – to send your W-2 if it has not already been sent. Make sure your employer has your correct address.

2. Contact the IRS. After February 14, you may call the IRS at 800-829-1040 if you have not yet received your W-2. Be prepared to provide your name, address, Social Security number and phone number. You should also have the following information when you call:
• Your employer’s name, address and phone number;
• Your employment dates; and
• An estimate of your wages and federal income tax withheld in 2012, based upon your final pay stub or leave-and-earnings statement, if available.

3. File your return on time. You should still file your tax return on or before April 15, 2013, even if you have not yet received your W-2. File Form 4852, Substitute for Form W-2, Wage and Tax Statement, in place of the W-2. Use the form to estimate your income and withholding taxes as accurately as possible. The IRS may delay processing your return while it verifies your information.

If you need more time to file you can get a six-month extension of time. File Form 4868, Application for Automatic Extension of Time to File US Individual Income Tax Return.  If you are requesting an extension, you must file this form on or before April 15, 2013.

If you receive the missing W-2 after filing your tax return and the information on the W-2 is different from what you reported using Form 4852, then you must correct your tax return. File Form 1040X, Amended
U.S. Individual Income Tax Return to amend your tax return.

Forms and instructions are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:
•    Form 4852, Substitute for Form W-2, Wage and Tax Statement
•    Form 1040X, Amended U.S. Individual Income Tax Return

IRS YouTube Videos:
•    W-2 Missing?

Coping with Delayed Tax Season

IRS Offers Advice for Coping with Delayed Tax Season

WASHINGTON, D.C. (JANUARY 23, 2013)

BY MICHAEL COHN

The Internal Revenue Service provided advice to taxpayers Wednesday on dealing with the late opening of tax season on January 30 that could also prove helpful to tax preparers.

For the first time this tax season, the "Where's My Refund?" tool will provide personalized refund timelines for taxpayers.

The IRS noted that it would begin processing most individual income tax returns on Jan. 30 after updating its forms and completing the programming and testing of its processing systems. The IRS contended that it had anticipated many of the tax law changes made by Congress under the American Taxpayer Relief Act, but the final law requires some changes before the IRS can begin accepting tax returns.

Many major software providers are accepting tax returns in advance of the Jan. 30 processing date, the IRS noted. These software providers will hold onto the returns and then electronically submit them after the IRS systems open. The IRS advised taxpayers who use commercial software to check with their provider for specific instructions about when they will accept your return. Software companies and tax professionals then send the returns to the IRS, but the timing of the refunds is determined by IRS processing, which starts Jan. 30.The IRS reiterated that it will not process paper or electronic tax returns before the Jan. 30 opening date, so there is no advantage to filing on paper before then  Using e-file is the best way to file an accurate tax return, the IRS insisted, and using e-file with direct deposit is the fastest way to get a refund.

After the IRS starts processing returns, it expects to process refunds within the usual time frames. Last year, the IRS issued more than nine out of 10 refunds to taxpayers in less than 21 days, and it expects the same results in 2013. Even though the IRS issues most refunds in less than 21 days, some tax returns will require additional review and take longer. To help protect against refund fraud, the IRS has put in place stronger security filters this filing season.

After taxpayers file a return, they can track the status of the refund with the “Where’s My Refund?”  tool, which is available on the IRS.gov Web site. This year, instead of an estimated date, the Where’s My Refund? tool will give people an actual personalized refund date after the IRS processes the tax return and approves the refund.

"Where's My Refund?" will be available for use after the IRS starts processing tax returns on Jan. 30. The IRS also provided several tips for using "Where's My Refund?" after it becomes available on Jan. 30:

• Initial information will generally be available within 24 hours after the IRS receives the taxpayer’s e-filed return or four weeks after mailing a paper return.

• The system updates every 24 hours, usually overnight. There’s no need to check more than once a day.

• “Where’s My Refund?” provides the most accurate and complete information that the IRS has about the refund, so there is no need to call the IRS unless the web tool says to do so.

• To use the “Where’s My Refund?” tool, taxpayers need to have a copy of their tax return for reference. Taxpayers will need their social security number, filing status and the exact dollar amount of the refund they are expecting.

For the latest information about the Jan. 30 tax season opening, tax law changes and tax refunds, visit IRS.gov -  www.irs.gov.

American "Tax Relief Act"

American "Tax Relief Act" Signed by President Obama

  Pulling back from the “fiscal cliff” at the 13th hour, Congress preserved most of the George W. Bush-era tax cuts and extended many other lapsed tax provisions. Shortly before 2 a.m. Tuesday, the Senate passed the American Taxpayer Relief Act (ATRA), H.R. 8. The House of Representatives approved the bill by a vote of 257 late on Tuesday evening, after plans to amend the bill to include spending cuts were abandoned. The bill was signed by President Obama on Wednesday. Notable items for successful taxpayers include:
 
1 All the individual marginal tax rates under EGTRRA and JGTRRA are retained (10%, 15%, 25%, 28%, 33%, and 35%). A new top rate of 39.6% is imposed on taxable income over $400,000 for single filers, $425,000 for head-of-household filers, and $450,000 for married taxpayers filing jointly ($225,000 for each married spouse filing separately).
2 The personal exemptions and itemized deductions phaseout is reinstated at a higher threshold of $250,000 for single taxpayers, $275,000 for heads of household, and $300,000 for married taxpayers filing jointly.
3 A 20% rate applies to capital gains and qualified dividends for individuals above the top income tax bracket threshold; the 15% rate is retained for taxpayers in the middle brackets. The zero rate is retained for taxpayers in the 10% and 15% brackets.
4 The exemption amount for the AMT on individuals is permanently indexed for inflation. Relief from AMT for nonrefundable credits is retained.
5 The estate and gift tax exclusion amount is retained at $5 million indexed for inflation ($5.12 million in 2012), but the top tax rate increases from 35% to 40% effective Jan. 1, 2013. The estate tax “portability” election, under which, if an election is made, the surviving spouse’s exemption amount is increased by the deceased spouse’s unused exemption amount, was made permanent by the act.
6 If an employer offers a designated Roth 401(k) plan, ATRA will now allow individuals to convert their existing 401(k) to a Roth 401(k) whether or not the individual is allowed to take a distribution from the plan.