Proposed Regs Increase User Fees for Installment Agreements

(Parker Tax Publishing August 2016)

The IRS has issued proposed regulations, effective beginning January 1, 2017, that would increase the fee taxpayers are required to pay in order to enter into an installment agreement with the IRS. The regulations also establish new fees for taxpayers entering into such agreements online. REG-108792-16 (8/22/16).

Background

Code Sec. 6159 authorizes the IRS to enter into an agreement with any taxpayer for the payment of tax in installments, if the IRS determines that the installment agreement will facilitate the full or partial collection of the tax. Installment agreements are voluntary, and taxpayers may request an installment agreement in person, by completing the appropriate forms and mailing them to the IRS, online, or over the telephone. The terms of an installment agreement generally require the taxpayer to timely pay a minimum monthly payment, file all required tax returns, and pay all taxes in-full.

Since the enactment of the installment agreement program, the IRS periodically develops new ways for taxpayers to enter into and pay for installment agreements, such as through online payment agreements and direct debit online payment agreements. These installment agreement types have not had their own separate user fee, but instead have been included in the existing user fee structure.

To bring user fee rates for installment agreements in line with the current costs to the IRS, proposed regulations would increase the user fee for the existing installment agreement types and introduce new fees for online payment agreements and direct debit online payment agreements. Five of these proposed user fee rates are based on the full cost of establishing and monitoring installment agreements, while the sixth rate is for low-income taxpayers.

New and Increased User Fees for Installment Agreements

For regular installment agreements, taxpayers contact 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 (increased from $120).

For direct debit installment agreements, taxpayers contact 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 (increased from $52).

For online payment agreements, taxpayers set up an installment agreement through the IRS website and agree 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 (new for 2017).

For direct debit online payment agreements, taxpayers 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. The proposed fee for entering into a direct debit online payment agreement is $31 (new for 2017).

For restructured or reinstated installment agreements, taxpayers modify a previously established installment agreement or reinstate an installment agreement on which the taxpayer has defaulted. The proposed fee for restructuring or reinstating an installment agreement is $89 (increased from $50).

The low-income rate is 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. The proposed low-income rate is $43 (no change, but would now apply to restructured or reinstated agreements).

The proposed regulations provide that the increased fees are set to take effect for tax years after January 1, 2017.

For a discussion of installment agreements, see Parker Tax ¶250,515.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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