Friday, August 19, 2016

IRS wants to more than double some payment plan fees

Need time to pay off a big tax bill? It could cost you a lot more next year if fee hikes proposed by the Internal Revenue Service go into effect.


The IRS today announced plans to add a couple of new installment plan options and increase existing payment arrangement fees beginning Jan. 1, 2017.

Some taxpayers could see an 87.5 percent price hike, which would produce a top fee of $225 instead of the current maximum fee of $120.

And while the proposed $225 fee is the top dollar amount, the charge for another type of installment payment option would jump from the current $52 to $107, an almost 106 percent hike.

In addition to raising taxpayer eyebrows, the proposed installment plan fee hikes are this week’s By the Numbers contenders. It was a tough call, but the more than double percentage fee hike earns the exact 105.769 percent the (dis)honor.

Covering costs: The proposed price increases are part of several user fee changes the IRS has made this year.

The changes are due to a law that requires federal agencies to recover the cost of providing certain services to the public that confer a special benefit to the recipient.

The IRS is quick to note, however, that while some taxpayers will pay higher installment agreement fees, the agency will continue providing reduced-fee or no-cost services to low-income taxpayers

There would be no change to the current $43 rate that applies to approximately one in three taxpayers who qualify under low-income guidelines, according to the IRS.

These guidelines, which change with family size, would enable a family of four with total income of around $60,000 or less to qualify for the lower fee.

Also, says the IRS, it will offer for the first time any taxpayer regardless of income a new $31 rate if the filer requests an installment agreement online and chooses to pay through direct debit.

New, higher costs:Overall, the IRS is calling for six installment payment arrangements next year.

Three currently are allowed and would see increased fees. Two are new proposals and fees. One, which applies to low-income filers noted earlier, would stay the same.

Here’s the breakdown, listed from highest to lowest fee, of what the IRS wants to offer and charge with regard to installment tax payment plans starting in 2017.

$225 for a Regular Installment Agreement (increased fee for existing option)
In this case, a taxpayer contacts the IRS in person, by phone, or by mail and sets up an agreement by filing Form 9465 to make payments over a period of time, either by mailing a check or electronically through the Electronic Federal Tax Payment System (EFTPS). The current fee is $120. 

$149 for an Online Payment Agreement (new payment arrangement/fee)
Here a taxpayer sets up an installment agreement online at the IRS website and agrees to make manual payments over a period of time either by mailing a check or electronically through the EFTPS. 

$107 for a Direct Debit Installment Agreement (increased fee for existing option)
This rate would apply when 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 fee currently is $52, making the increase an almost 106 percent increase.

$89 for a Restructured/Reinstated Installment Agreement (increased fee for existing option)
When a taxpayer modifies a previously established installment agreement or reinstates an installment agreement on which the taxpayer has defaulted this proposed fee would apply. The IRS now charges $50 for such restructuring, making the change a 78 percent increase.

$43 Low-income Rate (no change)
There would be no changes to this current reduced installment plan rate. It now 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. 

$31 for a Direct Debit Online Payment Agreement (new payment arrangement/fee)
This proposed lowest rate would apply to taxpayers who set up an installment agreement through the IRS website and agree to make automatic payments over a period of time through a direct debit from a bank account.

Basically, the IRS’ proposed fee structure is another move to automate its procedures. If you enter into a payment plan through an online application and have the money sent directly each month to the IRS, you’ll save substantially on application fees.

IRS accepting public comment: Think the fee hike is too much? I thought you might.

The IRS explains how it came up with the new amounts in its official announcement of the proposed installment payment plan fee hikes that will be published in the Federal Register on Monday, Aug. 22.

If you want to let the IRS know your thoughts on the suggested higher fees or offer changes you think the agency should make, you can submit your comments, either in writing or electronically, by Oct. 6.

Snail mail your paper submissions to:

Internal Revenue Service
CC:PA:LPD:PR (REG-108792-16), Room 5203
Post Office Box 7604, Ben Franklin Station
Washington, D.C. 20044.

You can hand deliver your thoughts yourself or by messenger on Monday through Friday between 8 a.m. and 4 p.m. Eastern Time to:

Internal Revenue Service
CC:PA:LPD:PR (REG-108792- 16), Courier’s Desk
1111 Constitution Avenue, N.W.
Washington, D.C. 20224

The IRS also is accepting comments electronically via the Federal eRulemaking Portal. Note IRS and REG-108792-16 on your digital submission.

If you want to follow up your comments in person, the IRS is holding a public hearing on the installment plan fee hikes at the IRS headquarters on Constitution Avenue in northwest D.C. on Oct. 19. The gathering will be held in the Main Internal Revenue Auditorium, beginning at 2 p.m. ET.

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IRS wants to more than double some payment plan fees

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