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IRS To Unemployed: Avoid Paying Tax Penalties

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If you are unemployed, you may be able to get away with not paying taxes...for now.

The IRS announced on Wednesday that people who have been unemployed for 30 days or more and don't have enough money to pay their taxes are eligible to avoid tax penalties for late payments. You will need to fill out Form 1127A by April 17 to be eligible to postpone paying taxes.

The form is available here.

If you postpone your 2011 tax deadline, you will need to pay in full by October 15, 2012. This grace period could give the unemployed a chance to find another job before having to pay their taxes.

One caveat: If you're unemployed and can afford to pay now, you probably should. The IRS is still charging interest on unpaid taxes, which amounts to 3 percent annually.

"We have an obligation to work with taxpayers who are struggling to make ends meet," IRS Commissioner Doug Shulman said in a statement.

The new opportunity also is available to the self-employed if their business income has fallen at least 25 percent because of the anemic economy, according to the IRS.

The upper middle class and the rich won't be able to get away with postponing taxes. Only married couples making less than $200,000 per year and unmarried people making less than $100,000 per year are eligible for postponing their taxes.

The penalty that is being waived amounts to 0.5 percent of taxes per month. This tax relief is an expansion of the IRS' "Fresh Start" program, which it started in December of 2008 after the stock market crash to help struggling taxpayers.

Quite a few Americans will be eligible for avoiding tax penalties. 12.76 million Americans were unemployed in January, and the average unemployed person is jobless for 38.2 weeks, according to the Bureau of Labor Statistics.

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