Extension of Time for Payment Due to Undue Hardship
Time is running out for most taxpayers to file their Federal Income Tax Returns and pay whatever is owed to the government. However, this year some people are eligible for additional time to pay without getting hit by a stiff penalty.
Some background: In most cases, the official deadline for 2011 is April 17th (the 15th is on a Sunday and the 16th is a holiday in Washington, DC). Those who can't meet the April 17th deadline, can file for a 6 month extension with the IRS and that would give them until October 15th to file; but it wouldn't give them more time to pay.
Recently, the Internal Revenue Service announced plans for “new penalty relief” for some taxpayers on the failure-to-pay penalties, due to undue hardship.
The IRS is granting a new 6 month grace period on failure-to-pay penalties for “certain wage earners and self-employed individuals.” The request for an extension to pay any taxes owed 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 October 15, 2012.”
This special relief is available to 2 types of taxpayers; one is wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17th deadline. The second type is for self-employed individuals who experienced a 25% or greater reduction in business income in 2011 due to the economy.
However, there are strict income limits: A taxpayer‘s income must not exceed $200,000 if he/she files as married filing jointly or not exceed $100,000 if he/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.”
But don‘t expect any relief from interest as well. The IRS says it still is legally required to charge interest on unpaid back taxes and does not have the authority to waive that charge. The rate is currently 3% annually.
Keep in mind that failure to pay the full amount by the payment extension date will result in a penalty calculated from the original payment due date.
For more information, please call the office 714.755.1040 or go the IRS website www.irs.gov.
