For the first time since 2007, the Internal Revenue Service plans to increase the processing fees for offers in compromise and installment agreements, starting on January 1, 2014. After January 1st, taxpayers who are entering into installment agreements will be expected to pay approximately 15% more in 2014 than in 2013. The fee for reinstating or restructuring an installment agreement will raise 12% in 2014. The most significant change will be a 25% increase in the processing fee for an offer in compromise. However, fees for direct debt installment agreements and low-income fees and fee waivers will remain unchanged.
While some proposed to cancel the fee for installment agreement for low-income altogether, the IRS responded that unlike installment agreements, where the taxpayer is expected to pay the tax liability in full, the fee for an offer in compromise is a fee for mere consideration of the offer, and is not refundable should the offer not be accepted. This can potentially turn away low-income taxpayers from submitting a consideration for an offer in compromise, and could even increase the hardship on some taxpayers that don’t have the ability to pay their tax debts in full.
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