IRS Raising Fees for Payment Installment Agreements
Fees are everywhere. They are popping up left and right. And they’re escalating. This is attributed to the increasing cost of doing business. To remain open, businesses pass their expenses along to us–in the form of fees. The IRS has plans to increase fees too.
If you’re one of the many people who make payment arrangements with the IRS take note: the fees for submitting an installment agreement request is scheduled to increase. (The increase is so new IRS hasn’t fully updated their website yet.) How do we avoid this one?
The fee to request an installment agreement has been $43. Now it’s going to jump to $105– a $62 increase! And it doesn’t even guarantee you a payment plan. It is just a request. Fees for restructuring an installment agreement will almost double, from $24 to $45.
While the effective date hasn’t been announced, you still have the opportunity to avoid these increased fees. Your best bet is to keep from owing the IRS money.
Analyze your tax liabilities to avoid underpayment. Make sure your withholding or estimated payments are large enough. If your withholding suited you last year, don’t assume it will work again this year. Changes in tax laws and in your personal financial situations can lead to necessary adjustments of your withholding. Here’s how you check.
The IRS provides an online calculator for those of us who are employed. It’s easy and you don’t have to worry about the math! Their site even states “most people will find it more accurate and easier to use than the worksheets that accompany Form W-4.” Once you complete the online calculator, the program provides you with new information to update with your employer.
Unfortunately, the IRS doesn’t supply an online calculator for us self-employed people. We use Form 1040ES. Take a deep breath, it won’t be difficult. On page 4 there are 17 simple steps to figure your payment amounts.
Remember, if you are overpaying your estimated payments and get huge refunds each year, the government is making interest off your money. Adjust your withholding or estimated payments. Keep the money in YOUR pocket! I suggest setting up an interest bearing savings account. ING Direct is an easy to use online bank which offers some of the best interest rates in the industry.
If you are fearful of owing money when you file this year adjust your withholding. What if you choose not to make the necessary adjustments? Putting money aside in an interest bearing savings account is a good option for you also!
And finally, if an installment agreement is your end of the rope, last hope the IRS will kindly reduce the fee to $52 if you pay by direct debit.
Proper planning can help you avoid over and underpayment of your taxes. If you have any doubt about your withholding or estimated payment calculations send me an e-mail or contact your licensed tax professional.
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