IRS Automates Installment Agreement User Fees

by Mike Godfrey, for LawAndTax-News.com, Washington

05 March 2008

The Internal Revenue Service announced on Tuesday that it has automated the user fee calculations for taxpayers entering into an installment agreement.

Previously, taxpayers were required to submit a paper Form 13844 to request a reduced user fee. Now, eligibility for reduced fees is determined automatically by the IRS.

According to the IRS, an installment agreement allows taxpayers to pay their full tax debt in smaller, more manageable amounts, though penalties and interest continue to accrue on the unpaid portion of that debt. Taxpayers are charged a one-time fee to set up an installment agreement with the IRS. A reduced fee is available for qualifying taxpayers.

Generally, user fees are USD105 for non-direct debit agreements, USD52 for direct debit agreements and USD45 for reinstatements.

However, the fee is only USD43 for taxpayers with income at or below certain US Department of Health and Human Services poverty guidelines.

All taxpayers entering into an installment agreement will automatically be considered for the reduced user fee using information the IRS already has on hand from the taxpayer’s current tax return.

Those who qualify will be charged the reduced USD43 fee for all installment agreements established through any method. These include the Online Payment Agreement application on the IRS website, telephone, face-to-face or mail.

“This new process will improve service for and reduce the paperwork burden on taxpayers applying for an installment agreement,” explained acting IRS Commissioner Linda E. Stiff. “Now, taxpayers who are eligible for the reduced fee will automatically receive it without extra work on their part.”

In some instances, taxpayers may receive an installment agreement acceptance notice from the IRS but not a reduced user fee, even though they believe they still should qualify for one. In that situation, taxpayers can request a reduced fee by completing Form 13844, Application for Reduced User Fee for Installment Agreements, and submit it to the IRS within 30 days of receipt of the installment agreement acceptance notice. The IRS will evaluate the application and respond to the taxpayer.

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