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New User Fees Proposed for IRS Installment Agreements

By Sally P. Schreiber, J.D.

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The user fees taxpayers must pay to enter into an installment agreement with the IRS will be changing after Jan. 1, 2017, under proposed regulations issued by the IRS on Friday (REG-108792-16). Installment agreements allow taxpayers to pay off their tax liabilities in monthly installments.

Currently, the user fee for an installment agreement is $120, which can be lowered to $52 for a taxpayer who agrees to have installment payments directly debited from a checking account. The IRS charges a $50 fee to restructure or reinstate an installment agreement that is in default.

A low-income taxpayer who has income at or below 250% of the dollar criteria for poverty updated annually by the U.S. Department of Health and Human Services in the Federal Register pays no more than $43; this amount is not changed under the new rules.

Under the proposed rules, the new fee for a regular installment agreement, in which the taxpayer contacts the IRS in person, by phone, or by mail and sets up an installment agreement to make manual payments by check or via the electronic funds transfer payment system (EFTPS) will pay a fee of $225 (up from $120). The $225 fee can be lowered to $107 if the taxpayer agrees to direct debits.

Taxpayers who apply online, but pay by check or EFTPS, will pay $149. Using the online application system at irs.gov and agreeing to direct debit lowers the fee to $31. The fee to restructure or reinstate an installment agreement that is in default will increase to $89.

As noted above, the fee for low-income taxpayers will not increase. It stays at $43, but those taxpayers will not have to pay the regular rate to reinstate an agreement that is in default. Under the old rules, low-income taxpayers had to pay the $50 fee for reinstatement but now will only have to pay $43 and will not be subject to the new $89 fee that applies to other taxpayers. 

These rules are proposed to apply beginning Jan. 1, 2017; the IRS is accepting comments on the proposed changes and has scheduled a public hearing in Washington on Oct. 19. 

—Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.