The IRS recently reviewed the government cost of processing IRS tax payment installment agreements, which has resulted in the IRS proposing to increase the costs for filing IRS installment agreements.
The IRS tax payment installment agreement is one of the remedies of last resort for taxpayers who have outstanding tax liabilities. There are a number of rules associated with the IRS installment agreement program, but generally, the program allows taxpayers to pay their tax obligations out over time. In exchange for this extended payment time, the taxpayer is required to waive certain rights.
In Proposed Regulation 148576-05 the IRS indicates that it will raise the cost of filing an IRS installment agreement to $105, from the current $43 fee. The Proposed Regulation also indicates that the IRS installment agreement filing fee will only be $52 if the taxpayer agrees to allow the IRS to draft the payments directly from the taxpayer’s bank account.
According to the IRS, the increase in the fee is due to the increased cost to the IRS to process IRS installment agreements and the reduced cost for those who allow the IRS to draft funds from their bank accounts is due to the IRS believing that it will result in fewer installment agreement defaults.
About the IRS Installment Agreement
If you owe taxes to the IRS but cannot pay the full amount owed immediately, an installment agreement may be a good option for you. An installment agreement allows you to pay your tax debt in monthly installments, with interest and penalties still accruing until the balance is paid in full.
One of the benefits of an IRS installment agreement is that it can help you avoid more drastic collection actions by the IRS, such as wage garnishment or a bank levy. It can also help you avoid the negative impact of a tax lien on your credit report. In addition, an installment agreement can give you some breathing room to get your finances in order and pay off your tax debt over time.
Another benefit is a reduced penalty rate. If you file your tax return on time and enter into an IRS installment agreement to pay your tax debt, the late payment penalty rate will be reduced to 0.25% per month, instead of up to 1% per month. This reduced rate is available for the duration of the installment agreement, as long as you make all payments on time and in full.
To be eligible for an IRS installment agreement, you must meet certain requirements. First, you must have filed all required tax returns. Second, you cannot owe more than $50,000 in combined individual income tax, penalties, and interest. If you owe more than $50,000, you may still be eligible for an installment agreement, but you will need to provide additional financial information to the IRS. Finally, you must be able to pay the tax debt in full within 72 months, or six years.
There are some drawbacks to installment agreements. One involves the filing of an IRS lien notice. The IRS will usually file an IRS lien if you enter into an installment agreement–which it might have already done anyway. The other is that this puts you on a plan and will trigger notices and fees if you default on the installment agreement.
The IRS installment agreement can be a lifeline for taxpayers who are struggling with unpaid taxes. This is particularly true for those who cannot qualify to settle their balance for less or get on currently not collectible status. We help taxpayers with installment agreements. Please contact us if you need help with your unpaid taxes.
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