Most Taxpayers Face Additional Fees for IRS Installment Requests

Ever since the kinder and gentler IRS eased the restrictions on its installment agreement request and made the process automatic, it’s not uncommon for taxpayers to add their federal tax liability to the list of debts they pay over time. There has always been a fee associated with creating an IRS installment plan. Until now, the up-front fee has been a flat $43, and that fee has remained unchanged since the program was enacted in 1995.

Effective January 1, 2007, the new IRS fee for entering into an installment agreement for paying a federal tax liability over time is $105. The IRS has also increased its fee for setting up a direct debit installment agreement from $43 to $52. The former $43 fee for both services still exists for taxpayers categorized as low-income taxpayers, which is to say taxpayers with income at or below 25% of the U.S. Department of Health and Human Services poverty guidelines. The poverty guidelines are issued each year in the Federal Register.

The 2007 poverty guidelines won’t be announced until later this month, but for 2006, the poverty guidelines are reflected in the table below. Based on this table and the IRS formula, in 2006 family of four living in Kentucky and earning $50,000 (250% of the table amount) or less would qualify for the lower installment plan fee.

The increase in IRS fees is designed to reflect the full cost of providing the various services. In addition to the increased fees for establishing installment plans, the IRS has increased its fee for restructuring or reinstating an installment plan from $24 prior to 1/1/07 to $45. All taxpayers are affected by this fee increase. The Office of Management and Budget ordered the IRS to adjust its fees to reflect actual cost.

2006 HHS Poverty Guidelines
Persons in Family or Household 48 Contiguous States and D.C. Alaska Hawaii
1 $9,800 $12,500 $11,270
2 $13,200 $16,500 $15,180
3 $16,600 $20,750 $19,090
4 $20,000 $25,000 $23,000
5 $23,400 $29,250 $26,910
6 $26,800 $33,500 $33,820
7 $30,200 $37,750 $34,730
8 $33,600 $42,000 $38,640
For each additional person, add $3,400 $4,250 $3,910

2006 HHS Poverty Guidelines
Persons in
Family or Household 48 Contiguous
States and D.C. Alaska Hawaii
1 $ 9,800 $12,250 $11,270
2 13,200 16,500 15,180
3 16,600 20,750 19,090
4 20,000 25,000 23,000
5 23,400 29,250 26,910
6 26,800 33,500 30,820
7 30,200 37,750 34,730
8 33,600 42,000 38,640
For each additional
person, add 3,400 4,250 3,910

2006 HHS Poverty Guidelines
Family size – Amount
1 - $9,800 (Alaska $12,250, Hawaii $11,270)
2 - $13,200 (A $16,500, H $15,180)
3 - $16,600 (A $20,750, H $19,090)
4 - $20,000 (A $25,000, H $23,000)
5 - $23,400 (A $29,250, H $26,910)
6 - $26,800 (A $33,500, H $30,820)
7 - $30,200 (A $37,750, H $34,730)
8 - $33,600 (A $42,000, H $38,640)
each additional family member - $3,400 (A $4,250, H $3,910)

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