Many of my clients find themselves in deep trouble around 15 April. They have badly miscalculated (maybe I should use the word ‘misconstrued’) how much they will have to pay the IRS.
Up until now, that meant we would prepare Form 9465 (which is an installment agreement request; it’s automatically approved if the taxpayer indebtedness is $25K or less) on our client’s behalf and submit that form along with their tax return. They would owe a small fee, and interest would still be tacked onto the amount owed. A very simple process. And this choice saves another taxpayer from credit destruction.
But, the rules are changing. Effective this January. Higher income taxpayers are going to have to pay higher fees. But, poorer taxpayers will be getting a break. The IRS is changing the process to be in compliance with new Congressional laws that demand user fees reflect the benefit(s) received by the recipient.
This means the installment fee will now be as high as $225, almost double what it had been for most taxpayers. (Low income taxpayers will still be able to pay $43.) That higher fee obtains if the taxpayers makes arrangements over the phone, by mail, or even by filling in and mailing Form 9465.
But, if the request is made online (via the new Online Payment Agreement request), the fees will be lower. And everyone- regardless of how they request the installment plan- will be able to incur lower fees, if their monthly payments are automatically drafted from their bank account. As an example, that $225 fee becomes $107, should direct withdrawal be chosen for each of the installments. (The fee is $149 and not $225, if the online application is used.)
So, we will be using the online method for our clients in this predicament. (So should you, if you need to arrange the payment of your taxes over time.) But, we’d love it more if these folks withheld the proper amount (or made the appropriate estimated tax payments) and not be up the creek on 15 April.
Thank you for the heads up on this–I wasn’t aware of it.
And, let’s hope you never need it!
Thanks for the visit and the comment.
And the fees go up… | https://t.co/FQixS8xmvN via @Adjuvancy
Attention – And the fees go up… | https://t.co/ed4fsn9qh6 via @Adjuvancy
I have to admit – as a “lower income” taxpayer – the concept of “user fees have to reflect the benefit derived” sounds good – in theory. In practice, we know what can happen when government gets involved in something like this. Hoping there isn’t an “unintended consequence” lurking here.
I always worry that user fees become modalities to preclude users…. We shall have to hope this is not true for these user fees.