IRS Increases User Fee Cost

Posted on June 01, 2016

For many years now, the IRS has charged a user fee to taxpayers depending on the type of services or relief that they are seeking. The IRS has implemented user fees to offset budget cuts forced upon the IRS by Congress over the last several years and to recapture costs associated with some services.

In some cases, the IRS is increasing the user fee to let it reflect the full cost of those services provided to taxpayers. However, fees have historically been adjusted downward to make services available to a broader range of people. That said, budgetary issues have made it necessary for the IRS to reconsider that approach.

The IRS now states that it will only charge user fees at less than full cost when there is a compelling reason, such as for services provided to low-income taxpayers. In the past, filing an Offer in Compromise with the IRS, where you attempt to cut a deal on your past tax liability, was free to file. The IRS subsequently implemented user fees to file an Offer in Compromise, and these fees have steadily increased over the past decade.

Currently, it costs $186 to file an Offer in Compromise. This fee is a non-refundable user fee and does not include the additional payments that must be made under the Offer when it is filed. Some of the user fees are shocking.

For example, if you enter into the IRS’ pre-filing agreement program, the user fee will skyrocket from $50,000 to $134,300 after June 2, 2016. Worse yet, the user fee will increase to $218,600 beginning in 2017.

Although the IRS states that the user fee increases are not designed to discourage taxpayers from participating in the various programs that are available, the increased cost of user fees on taxpayers will certainly put a chill on these programs.

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