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IRS Recommended To Waive Certain Instalment Agreement Fees

by Scott Hamilton,, Washington

21 October 2016

The American Bar Association Section of Taxation has recommended that the US Internal Revenue Service (IRS) should adopt a full waiver of the user fee for installment agreements for low-income taxpayers.

A notice of proposed rulemaking and request for comments issued by the IRS in August this year proposed a revised schedule of user fees that would apply to any taxpayer who enters into an installment agreement after their effective date of January 1, 2017.

The proposed regulations confirmed that an increased top rate of USD225 (up from USD120) would apply to regular installment agreements, but that there would be no change to the current USD43 rate that applies to the approximately one in three taxpayer requests that qualifies under low-income guidelines.

These guidelines for taxpayers whose income is below 250 percent of the federal poverty level (which change with family size) would enable a family of four with a total income of around USD60,000 or less to qualify for the lower fee.

However, while commending the IRS for not increasing the user fee for low-income taxpayers, the ABA said "any user fee is likely to create a financial and psychological barrier to entering into an installment agreement, … [and that] waiving this fee would help remove a barrier for low-income taxpayers and encourage voluntary payment compliance."

The ABA noted that "the two most prevalent collection alternatives for low-income taxpayers are installment agreements and Offers in Compromise (OIC) based on doubt as to collectability. These alternatives serve the same purpose – they permit and encourage taxpayers to pay what they can towards their tax liabilities. … In the OIC context, the IRS waives the entire user fee for qualified low-income taxpayers. We suggest the IRS adopt the same policy for low-income installment agreements."

It is concluded that the elimination of the low-income taxpayer user fee for installment agreements could therefore improve tax compliance by increasing the number of low-income taxpayers who make payments on their tax liabilities.

TAGS: individuals | compliance | tax | tax compliance | law | fees | Internal Revenue Service (IRS) | tax authority | United States | regulation | individual income tax | Tax

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