The IRS "Fresh Start" initiative helps struggling taxpayers avoid certain failure-to-pay penalties. Eligible taxpayers have an extra six months (until October 15, 2012) to pay tax and interest due without being penalized.
Two categories of taxpayers are eligible:
- Wage earners who have been unemployed at least 30 consecutive days between January 1, 2011 and April 17, 2012.
- Self-employed individuals who experienced a 25% or greater reduction in business income in 2011 due to the economy.
If you meet either of these criteria and would like to request penalty relief, you will need to complete Form 1127A and mail it to the IRS. This form is filed separately from your tax return.
Although TaxACT does not support Form 1127A, you can still use TaxACT to file your tax return. See IRS Form 1127A to print the form from the IRS website. You should mail the completed form to the address listed on page 3. Do not attach this form to your return or mail it to the address used for your tax return.
The penalty relief is subject to certain limits. To be eligible for relief, a taxpayer's income must not exceed $200,000 if married filing jointly, or $100,000 if head of household or single. Also, the taxpayer's balance due for 2011 must not exceed $50,000.
See Expanded Fresh Start Initiative for more information on penalty relief and expanded access to installment agreements.