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IRS Proposes Increased User Fees for Installment Agreements, Offers in Compromise

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On Thursday, the IRS issued proposed regulations to raise user fees for installment agreements from $105 to $120 and for offers in compromise from $150 to $186. The new fees are scheduled to take effect Jan. 1, 2014 (REG-144990-12). The user fees have not been raised since 2007 for installment agreements and since 2003 for offers in compromise.

The fee for installment agreements that are paid by direct debit from taxpayers’ bank accounts will remain $52, as will the $43 fee for low-income taxpayers (defined in Regs. Sec. 300.1(b)(2)), but the fee for restructuring or reinstating an installment agreement will rise from $45 to $50.

While offers in compromise will now cost $186 instead of $150, there will continue to be exceptions for low-income taxpayers (defined in Regs. Sec. 300.3(b)(1)(ii)) and for taxpayers for whom the offer is based on a doubt as to liability. Both of those groups will continue to pay no fee.

In the preamble to the proposed regulations, the IRS explained that it is required to charge user fees to cover the full cost of government-provided services that confer benefits on taxpayers above what the general public receives. Installment agreements and offers in compromise confer those types of benefits.

The IRS says that it recently reviewed the installment agreement and offers in compromise programs and determined that its full cost to provide an installment agreement is $282. The full cost for a direct debit agreement is $122. The full cost of an offer in compromise is $2,718. While federal agencies are generally required to charge their full cost to provide services that confer benefits on identifiable recipients over and above those benefits received by the general public, the IRS has received a waiver from the Office of Management and Budget from charging fees to cover the full cost of the two programs.

Comments on the proposed rules may be sent to the IRS within the next 30 days, and a public hearing is scheduled for Oct. 1.