The IRS is proposing to increase fees for entering into installment agreements and add new levels for determining a fee in proposed regulations (REG-108792-16). The proposed changes would take effect on January 1, 2017.
The IRS explained that the fees in place today were set below what it costs the IRS to process the installment agreements. The IRS explains:
Historically, the IRS charged a user fee that recovered less than the full cost of an installment agreement to make the service more accessible to a broader range of taxpayers. However, in light of constraints on IRS resources for tax administration, the Treasury Department and the IRS have determined that it is necessary to recoup the full costs of the installment agreement program.
The current fees are outlined by the IRS:
Under § 300.1, the IRS currently charges three rates for installment agreements. The user fee, in general, is $120 for an installment agreement. The user fee is reduced to $52 for a direct debit installment agreement, which is an agreement whereby the taxpayer authorizes the IRS to request the monthly electronic transfer of funds from the taxpayer's bank account to the IRS. The user fee is $43 notwithstanding the method of payment if the taxpayer is a low-income taxpayer, as defined below.
The IRS outlines the following proposed fees:
- Regular Installment Agreements -- A taxpayer contacts the IRS in person, by phone, or by mail and sets up an agreement to make manual payments over a period of time either by mailing a check or electronically through the Electronic Federal Tax Payment System (EFTPS). The proposed fee for entering into a regular installment agreement is $225.
- Direct Debit Installment Agreements -- A taxpayer contacts the IRS by phone or mail and sets up an agreement to make automatic payments over a period of time through a direct debit from a bank account. The proposed fee for entering into a direct debit installment agreement is $107.
- Online Payment Agreements -- A taxpayer sets up an installment agreement through http://www.irs.gov and agrees to make manual payments over a period of time either by mailing a check or electronically through the EFTPS. The proposed fee for entering into an online payment agreement is $149.
- Direct Debit Online Payment Agreements -- A taxpayer sets up an installment agreement through http://www.irs.gov and agrees to make automatic payments over a period of time through a direct debit from a bank account. The proposed fee for entering into a direct debit online payment agreement is $31.
- Restructured/Reinstated Installment Agreements -- A taxpayer modifies a previously established installment agreement or reinstates an installment agreement on which the taxpayer has defaulted. The proposed fee for restructuring or reinstating an installment agreement is $89.
- Low-Income Rate -- A rate that applies when a low-income taxpayer enters into any type of installment agreement, other than a direct debit online payment agreement, and when a low-income taxpayer restructures or reinstates any installment agreement. A low-income taxpayer is a taxpayer that has income at or below 250 percent of the dollar criteria established by the poverty guidelines updated annually in the Federal Register by the U.S. Department of Health and Human Services. Section 300.1(b)(2). The proposed low-income rate is $43.