While the unemployment crisis has made modest improvements in recent months, joblessness in the United States remains stubbornly high. Filing season can exacerbate the hardship under which many unemployed adults labor, as those receiving jobless benefits are taxed for the compensation and may end up with a large tax bill. However, new provisions announced by the IRS may provide some relief to individuals who are struggling to pay their balance.

The new rules would provide unemployed and self-employed individuals with a six-month grace period on failure-to-pay penalty fees if they meet certain conditions. In order to qualify, unemployed individuals must have been without a job at least 30 consecutive days during 2011 or 2012 up to the April 17 deadline for filing this year. The provision will also apply for self-employed workers who suffered an income loss of 25 percent or more in 2011 due to the economy.

In addition to these initial qualifying criteria, adults must also fall within certain income eligibility rules. Individuals who are married filing jointly must not have an income that exceeds $200,000 or $100,000 for adults filing as single or head of household. In addition, a taxpayer's 2011 bill must not exceed $50,000 in order to qualify.

The new provisions are an extension of the IRS' "Fresh Start" program, which was designed in 2008 to provide some relief to struggling taxpayers. The IRS also announced another change that will positively impact individuals who owe a balance for their 2011 taxes and plan on enrolling in an installment payment plan. The tax agency has raised the threshold from $25,000 to $50,000 for those who wish to make installment payments to settle their tax bill. In addition, adults who fall under this threshold will not be required to provide a financial statement to the IRS in order to enroll. The maximum length of an installment agreement has also been extended from 60 months to 72 months.

"We have an obligation to work with taxpayers who are struggling to make ends meet," said IRS commissioner Doug Shulman. "This new approach makes sense for taxpayers and for the nation's tax system, and it's part of a wider effort we have underway to help struggling taxpayers."

Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

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