Expansion of IRS 'Fresh Start' program provides relief

By James W. Rahmlow The Daily Record Newswire In 2011, the IRS launched its Fresh Start initiative to help taxpayers who had encountered economic difficulty in paying their taxes resulting from the most recent economic downturn. The primary benefits of the 2011 program were the streamlining of the installment agreement process for more small entities and the modification of certain aspects of the lien policies. For 2012, enhancements were released for the program Fresh Start for taxpayers filing 2011 returns. Included was an announcement that effective immediately, the dollar threshold for using an installment agreement without having to provide detailed financial information was doubled from $25,000 to $50,000. The maximum term is now extended with the streamlined agreements so that taxpayers can now take 72 months to pay versus the old 60 months. This is very taxpayer friendly. In order to take advantage of the enhanced program, taxpayers must file Form 9465-F, Installment Agreement Request. For taxpayers seeking an installment agreement accommodation in excess of $50,000, financial data must be provided on either form 433-A or Form 433-F. Taxpayers can pay the balance due down to or below the $50,000 at the time of filing so as to be able to take advantage of the streamlined process. Finally, the Fresh Start program allows certain unemployed taxpayers to obtain a six-month grace period from penalties for failure to pay the tax on a timely basis. Limitation on Residence Indebtedness Interest Deductibility for Unmarried Co-Owners In general taxpayers can deduct interest expense on indebtedness up to $1.1 million of mortgage indebtedness as an itemized deduction for personal residence debt. In a recent Tax Court case, two unmarried co-owners attempted to prove that they should each be entitled to the interest deduction on their $1.1 million indebtedness, effectively doubling the deduction. Going right to the language of the statute (Code Sec. 163(h)(3), the court reported that the language of the statute applied "with respect to any qualified residence" The language does not speak to a maximum by individual, but refers to an aggregate amount per residence. 2012 Vehicle Depreciation Dollar Limits Now Available In a recent announcement, the IRS released the maximum depreciation limits that will be allowed on taxpayer vehicles. This is an annual update and is designed to eliminate among other things, the writing off of luxury vehicles. The 2012 maximums are not sizably different from 2011 and are broken down into limits for passenger automobiles and light trucks and vans. For passenger vehicles, the maximum is $11,160 for the first year ($3,160 without bonus depreciation), $5,100 for year two, $3,050 for year three and $1,875 for each year thereafter. For trucks and vans, the maximum is $11,360 for the first year ($3,360 if bonus depreciation is not taken), $5,300 for the second year, $3,150 for the third year and $1,875 for each additional year. It should be noted that if a sport utility vehicle or a pickup truck has a gross vehicle weight rating in excess of 6,000 pounds, there is an exemption from the vehicle depreciation caps. Minimum Interest Rates Issued by IRS for April, 2012 In a recent revenue ruling, the IRS has issued short-term, mid-term and long-term applicable interest rates to be used for April 2012 transactions. Below is a summary of those rates. Adjusted AFR AFR Short-term 0.25% 0.22% Mid-term 1.15% 0.95% Long-term 2.68% 3.00% Updated rates will be issued by appropriate Revenue Ruling in mid May 2012. Summary of Filing data for the 2010 Filing Season The IRS has issued its Winter 2012 Statistics of Income bulletin reporting data on individual tax returns filed for tax year 2010. Some of the more interesting details are summarized below. Overall individual tax returns filed increased to 142.9 million returns from 140.5 million returns, almost a 2 percent increase. Cumulative Adjusted Gross Income increased from $7.6 trillion in 2009 to $8 trillion for 2010, bringing total AGI to levels comparable to 2007, the most immediate period prior to the economic downturn. Finally, total tax collected increased to $0.9 trillion from 2009, an 8.8 percent increase. As expected, the 2010 alternative minimum tax generated a whopping $24.3 billion in tax revenue. Proposed Regulations Require EIN Information to be Updated In a new information gathering initiative, the Internal Revenue Service has issued proposed regulations, which would require updated information for persons with an employer identification number, to be provided with the goal of obtaining correct ownership details. EIN's are the hallmark of the taxpayer identification system and are issued to corporations, unincorporated businesses, partnerships, nonprofit organizations, estates, trusts and other entities. The process of filing of Form SS-4, Application for Employer Identification Number is fairly straightforward and will remain unchanged. While it appears that the initial foray into obtaining updated information is directed toward nominees-individuals authorized by certain individuals to act on their behalf, often for a limited period of time-the proposed regulations require ANY person who is issued an EIN to provide updated information in the manner and frequency dictated by the instructions and forms. The IRS has indicated that it will issue appropriate additional guidance on this issue in the future. ---------- James W. Rahmlow, a certified public accountant, is a partner with Mengel, Metzger, Barr & Co. He can be contacted at jrahmlow@mmb-co.com. Published: Tue, Apr 3, 2012