The IRS Installment Agreement Fee for 2018
If you owe taxes to the IRS, you may be able to set up an installment agreement to pay your debt over time. This is a helpful option for those who cannot pay their taxes in full at once. However, there are fees associated with setting up an installment agreement, and these fees can vary from year to year.
For 2018, the IRS installment agreement fee is $31 for a direct debit agreement, and $107 for a standard or payroll deduction agreement. This means that if you set up a direct debit agreement to have your payments automatically withdrawn from your bank account, you will only pay $31 to set up the agreement. However, if you choose a standard agreement or a payroll deduction agreement, you will pay $107 to set up the agreement.
It`s important to note that if you are a low-income taxpayer, you may qualify for a reduced fee of $43 for a standard agreement or $31 for a direct debit agreement. To qualify for this reduced fee, you must submit Form 13844, Application for Reduced User Fee for Installment Agreements, along with your installment agreement request.
In addition to the set-up fees, there may be other fees associated with installment agreements, such as a fee for reinstating an agreement after it has defaulted, or a fee for changing the terms of an agreement. These fees can vary depending on the circumstances, so it`s important to review all fees associated with your installment agreement before agreeing to the terms.
It`s also important to note that interest and penalties will continue to accrue on your unpaid tax debt while you are making installment payments. The interest rate for the second quarter of 2018 is 5%, compounded daily. The late payment penalty is 0.5% of the unpaid tax amount per month, up to a maximum of 25%.
If you are considering setting up an installment agreement with the IRS, it`s important to weigh the costs and benefits. While an installment agreement can help you avoid more serious collection actions like wage garnishment or a tax lien, it can also add to the overall cost of your tax debt due to interest and fees. Make sure to consider all your options and consult with a tax professional before making a decision.
