Updates to IRS Fees for Installment Agreements and OIC

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Just like pretty much everything else in the world, the cost of doing business with the IRS has gone up.  The good news is that some fees did not increase for calendar year 2014, but some fees have gone up by significant rates.

Installment Agreement

This is where you have a balance due to the IRS for unpaid taxes, penalties and interest, and you’re unable to pay the amount at the present time in a lump sum.  So you set up an installment agreement with the IRS – where you agree to pay a set amount on a monthly basis until your balance is paid off.

If you set up a direct-debit payment plan – where the payment is pulled directly from you bank account – the fee to set this up remains unchanged from 2013 at $52.  This is the preferred method to set up such a plan, for the obvious reason that the IRS has direct access to debit your account for the payment, rather than relying on you to make the payment manually.

On the other hand, if you set up your installment agreement so that you control when the payment is sent (by paper check, for example), the fee for setting up this type of arrangement has increased in 2014 from $105 to $120, an increase of 14.2%.  Likewise, if you already have an agreement set up with the IRS and you need to restructure or reinstate a suspended installment agreement, the fee has increased from $45 to $50, an increase of 11.1%.

Offer in Compromise

An Offer in Compromise (OIC) is where you have a balance due to the IRS and you’re petitioning the IRS to settle the debt for less than the original balance due. (Sounds wonderful, doesn’t it? It’s not as easy as it sounds.)

In cases where your debt to the IRS is so great and your assets and income are so little that it is unlikely you’d be able to pay off the debt within a reasonable period.  There is a pre-qualification process that can help you to understand if you may be eligible for an OIC – the Offer in Compromise Pre-Qualifier.  Keep in mind that this is only a pre-qualification, there are no guarantees that the IRS will accept your application and offer. *Be very wary of tax professionals who claim that they can get you an OIC to pay your debt for “pennies on the dollar”. As with most things, if it sounds too good to be true, it probably is.

So if you pass the pre-qualification tests, you can then submit an application for an Offer in Compromise.  The fee for this application has increased in 2014, from $150 to $186, an increase of 24%.  If the application is approved, you have the option of either paying the compromise amount in one lump sum, or by periodic payments (much like the installment agreement above).  There is no additional fee for an installment agreement for OIC.

If you meet the low income requirements you will not need to send the application fee or make monthly payments while your offer is being reviewed.