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IRS Looks to Revise User Fees for Installment Agreements

Aug 22nd 2016
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A proposal issued by the IRS on Aug. 19 would change the user fees taxpayers must pay to enter into an installment agreement.

If approved, the revised fee schedule would go into effect on Jan. 1, 2017.

An installment agreement is an option for taxpayers who cannot pay their entire tax bills by the due date. The user fee for a regular installment agreement is currently $120, but it is reduced to $52 for taxpayers who make payments by direct debit from their bank account.

Under the proposal, the regular installment fee would increase from $120 to $225 for taxpayers who enter into an installment agreement in person, over the phone, by mail, or by filing Form 9465, Installment Agreement Request, with the IRS. The $225 fee is reduced to $107 for payments via direct debit.

There would be no change to the current $43 rate that applies to taxpayers who qualify under low-income guidelines. These guidelines, which change with family size, would enable a family of four with total income of approximately $60,000 or less to qualify for the lower fee. Also, for the first time, any taxpayer regardless of income would qualify for a new $31 rate by requesting an installment agreement online and choosing to pay what they owe through direct debit.

In addition, a taxpayer who chooses to set up an installment agreement using the agency’s online payment agreement application would pay a fee of $149. Similarly, they can cut this amount to just $31 by also choosing direct debit.

So, to recap, here are the fees the IRS is proposing:

  • Regular installment agreement: $225
  • Regular direct debit installment agreement: $107
  • Online payment agreement: $149
  • Direct debit online payment agreement: $31
  • Restructured or reinstated installment agreement: $89
  • Low-income rate: $43

A public hearing on the proposed regulations will take place in Washington, DC, on Oct. 19. The IRS is accepting comments on the proposed fee changes. Instructions on how to submit comments can be found here.

By law, federal agencies are required to charge a user fee to recover the cost of providing certain services to the public that confer a special benefit to the recipient. Installment agreements are an example of a service that confers a special benefit to eligible taxpayers, according to the IRS. Agencies must review these fees every two years to determine whether they are recovering the costs of providing these services.

In the past, the IRS often charged less than the full cost for many services in an effort to make them accessible to a broader range of taxpayers. But, the IRS said, given current constraints on agency resources, it can no longer continue this practice in most cases.

However, the agency said it intends to continue providing reduced-fee or no-cost services to low-income taxpayers. For that reason, the IRS will continue subsidizing part of the cost of providing installment agreements to low-income taxpayers.

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