The IRS is proposing a completely restructured fee schedule for installment agreements, which would take effect on January 1, 2017. This was announced via IRS newswire under the title: “IRS Proposes Revised Fees for Installment Agreements; New Lower Fee Available for Direct Debit Online Payment Agreements; Special Relief Provided to Low-Income Taxpayers.” Of course the title only tells half the story. It appears to have been intentionally spun to highlight only the favorable aspects of the fee schedule. If so, it was completely unnecessary; the only people who read these articles are savvy tax professionals who will probably read beyond the title and not the general taxpaying public who the IRS intended to trick. And if the title is intentionally misleading, it tells you a thing or two about the IRS’ low opinion of taxpayers.
Moving beyond the demeaning title, we can see that the fee for a Direct Debit Installment Agreement (DDIA), if done online, would be reduced ($31), the low-income taxpayer fee would remain the same ($43), and every other applicable IA fee would actually increase. The IRS is clearly trying to phase out the regular old installment agreement that is established by phone or mail and that is paid by sending in a check every month. Under the new fee schedule, the cost for that kind of agreement would be nearly twice as high as it is currently (from $120 to $225).
One of the big complaints we get from taxpayers is that they feel the IRS is constantly trying to “nickel and dime” them until they find themselves buried in a mountain of debt that they will never be able to repay. One of the ways the IRS does this is with interest and penalties. Of course if your tax debt is a big one, then we’re talking a difference of hundreds and thousands of dollars, not just nickels and dimes. Another way that taxpayers feel the vice tightening is when they get audited for tax periods they thought were already settled. It can be very disconcerting not knowing exactly what you owe and not knowing if that number could change. The new fee schedule proposal has that same feel for me, but I predict that very few taxpayers will ever notice they are being “nickel & dimed” this time. The reason I say that is most people do not set up plans for IRS tax relief payment schedule on a regular basis or with enough frequency to notice a change in fees. Yet another reason why the misleading title was unnecessary.
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