Robert J. Fedor, Esq., L.L.C.

Fee increase for tax relief programs proposed by IRS

Filing an income tax return before that annual April deadline is most often neither fun nor easy for taxpayers. The Federal Tax Code is not exactly a clear set of statutes, and this complexity can lead to an audit or notice from the Internal Revenue Service. In other cases, an individual may simply lack the funds to pay a tax liability.

When a taxpayer faces an outstanding tax debt that they simply cannot pay as a lump sum, an installment agreement or an offer in compromise can provide a solution. These two options are government programs for tax relief offered by the IRS, and they come with a user fee. The IRS recently announced its proposal to increase these fees for the first time in years.

An installment agreement is a program that allows a taxpayer to make monthly payments when they can’t pay the entire liability in full. Since 2007, the user fee for this program has held steady at $105 for the average individual. The new proposed fee would raise this amount up to $120. For those who pay direct debit out of their bank account, this fee will remain at $52. For those who qualify as a low-income taxpayer, this fee will remain at $43.

An offer in compromise is a program in which taxpayers can propose a settlement amount that is less than their total tax liability. For these individuals, the fee would rise from the current $150 set in 2003 to $186 at the start of 2014. Again, the exceptions for low-income taxpayers would still exist under the proposal.

When it comes to an unpaid tax liability, a $15 or $36 increase for user fees is often only a drop in the bucket when compared to the tax debt itself. The real concern should lie in ensuring that the best solution is found through the assistance of an experienced tax professional. Having a representative on your side to negotiate an installment agreement or offer in compromise can make all the difference when dealing with the IRS.

Source: Journal of Accountancy, “IRS proposes increased user fees for installment agreements, offers in compromise,” Sally P. Schreiber, Aug. 29, 2013

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