1.33.7. User Fees

(1) The IRS implemented user fees when the Independent Offices Appropriations Act of 1952 was passed. This act, codified by 31 U.S. Code (USC) 9701, Fees and charges for Government services and things of value, authorizes agencies to prescribe regulations that establish charges where the government provides special benefits to a recipient beyond those given to the general public. Regulations implementing user fees are subject to policies prescribed by the president in the Office of Management and Budget (OMB) Circular A-25, User charges. When the IRS began implementing user fees under this authority, receipts were deposited to the government’s general fund.

(2) Subsequent legislation permitted the IRS to retain and spend a portion of the user fees collected. The Treasury, Postal Service, and General Government Appropriations Act of 1995 authorized the IRS to expend up to $119 million per fiscal year of new or increased user fee receipts based on the cost of providing services. The annual spending cap was eliminated in the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and the Independent Agencies Appropriations Act of 2006. Public Law (PL) 109-115

(3) The Bipartisan Budget Act of 2018 modified user fee requirements for installment agreements, limiting fees to those in effect at its enactment and waiving fees for low-income taxpayers who enter into direct debit installment agreements. It also established reimbursement for low-income taxpayers who completed an installment agreement and were unable to make electronic debit payments.

(1) The authorities for this IRM include:

1. Treasury, Postal Service, and General Government Appropriations Act of 1995, PL 103–329

2. Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and the Independent Agencies Appropriations Act of 2006, PL 109–115

3. Pension Protection Act of 2006, PL 109–280

4. Tax Increase Prevention Act of 2014, PL 113-295

5. Freedom of Information Act, Vol VIII, No. 1, PL 114-185

6. 26 USC 482, Allocation of income and deductions among taxpayers

7. 26 USC 6103, Confidentiality and disclosure of returns and return information

8. 26 USC 6104, Publicity of information required from certain exempt organizations and certain trusts

9. 26 USC 6108, Statistical publications and studies

10. 26 USC 6110, Public inspection of written determinations

11. 26 USC 7521, Procedures involving taxpayer interviews

12. 26 USC 7528, Internal Revenue Service user fees

13. 31 USC 3302, Custodians of money

14. 26 USC 7809, Deposit of collections

15. 31 USC 9701, Fees and charges for Government services and things of value

16. Bipartisan Budget Act of 2018,PL 115-123

17. No Surprises Act of the 2021 Consolidated Appropriations Act, PL 116-260

(1) This section provides responsibilities for the:

1. CFO and Deputy CFO

2. Deputy Associate CFO Corporate Budget

3. Cost and User Fees office

4. Revenue Accounting Operations office

5. Financial Reporting and Analysis office

6. Financial Management Systems office

7. Government Payables and Funds Management office

8. Information Technology division

9. Business units

(1) The following reports are used to review the user fee program:

1. Commissioner’s chart

2. Biennial Review of User Fee Charges report

3. Offer in compromise analysis

4. Installment agreement analysis

(2) Program effectiveness is determined by the Cost and User Fees office comparing actual user fee collections to the business unit projections and analyzing variances.

(1) The Cost and User Fees office is responsible for:

1. Analyzing monthly volume and revenue information.

2. Reviewing supporting documentation to ensure user fee collections are classified and recorded correctly.

3. Developing the corporate overhead rate and managing the allocation cycles to ensure consistent costing methodologies for business units

4. Reviewing the business unit costing documents submitted during the biennial review to ensure accuracy and consistency.

5. Ensuring preparers, reviewers and approvers have separate roles and responsibilities.

6. Saving reports and supporting documentation on a shared drive with access limited to users with the appropriate job requirements.

(2) Business units are responsible for:

1. Reviewing user fee charges every two years to ensure rates are adjusted to reflect changes in costs and to determine if other agency programs should assess fees.

2. Implementing internal controls (e.g., management reviews, system access) applicable to their specific user fee processes.

(1) The following terms and definitions apply to this program:

1. Art - Paintings, sculptures, watercolors, prints, drawings, ceramics, antique furniture, decorative arts, textiles, carpets, silver, rare manuscripts and other similar objects.

2. Costs - The monetary value of resources used in performing activities or in acquiring or producing goods and services.

3. Corporate overhead rate - The rate calculated annually by the Cost and User Fees office and applied to total labor and benefit costs to determine the full cost of providing services.

4. Direct costs - The costs incurred directly by programs due to their budget execution. These include salaries, benefits, consulting, materials, supplies, etc.

5. Full cost - All costs used in generating activities, products and services, including direct, indirect and imputed costs.

6. Imputed costs - The unreimbursed costs required to be recognized by accounting standards.

7. Indirect costs - The costs of resources that are jointly or commonly used and cannot be reasonably identified and charged to a specific activity.

8. Market price - Price for goods, resources or services based on a competitive open market that creates neither a shortage nor a surplus of the goods, resources or services.

9. Overhead - Support costs not directly identifiable to a business unit functional area.

10. Special benefits - Privileges, goods or services that give recipients benefits beyond those available to the general public.

11. Support costs - The business unit costs that primarily support other IRS business units.

12. Sustaining costs - The business unit costs that support IRS Servicewide operations.

13. User fees - Charges levied by a federal agency on individuals or entities directly benefiting from a service provided by a government program or activity. User fees are charged for federal activities that provide recipients with benefits greater than those provided to the general public.

(1) The following acronyms apply to this program:

(1) IRM 1.35.16,Financial Accounting, Managerial Cost Accounting

(2) Federal User Fees, A Design Guide (General Accountability Office-08-386SP)

(3) OMB Circular A-25, User charges

(1) The OMB Circular A-25, User charges, provides guidance to government agencies for establishing and charging user fees for special benefits provided to recipients beyond those given to the general public. The charge imposed recovers full cost to the federal government for providing the special benefit or the market price.

(2) Full cost includes all direct and indirect costs to any part of the federal government for providing a good, resource or service.

(3) A special benefit enables the beneficiary to obtain more immediate or substantial gains or values than those given to the general public, provides business stability or contributes to public confidence in the business activity or beneficiary, or is performed at the request of or for the convenience of the recipient. It is beyond the services regularly received by other members of the same industry or group or the general public.

(4) Market price is the price for the good, resource or service based on competition in open markets and creates neither a shortage nor a surplus of the good. When a substantial competitive demand exists, competitive bidding or reference to prevailing prices in competitive markets for goods, resources or services that are similar to those provided by the government determines the market price.

(5) Agency heads or their designees may recommend to OMB exceptions to the general policy when the cost of collecting the fees would represent an unduly large part of the fee for the activity or any other condition exists that, in the opinion of the agency head or his or her designee, justifies an exception. IRS considers the implication of the user fee on low-income taxpayers, tax administration, taxpayer rights and cost of collecting the fees when determining the user fee rate and whether to request a waiver.

(1) The IRS charges a fee to recover the cost of activities for creating and managing Installment Agreement (IA) payment plans. These activities include answering phone calls, printing and mailing notices, and processing IA collections. The IRS must set the fees at full cost, not to exceed the amounts in effect at the enactment of the Bipartisan Budget Act of 2018 (February 9, 2018), or obtain a waiver from OMB. IRM 1.33.7.3

(2) An IA is an agreement between the IRS and the taxpayer that allows the taxpayer to pay his or her outstanding tax liability with monthly installment payments. The taxpayer agrees to pay a user fee for the cost of establishing a new, revised or reinstated IA. The IRS charges an origination fee to establish a new agreement, revise an existing agreement, or reinstate an agreement after the taxpayer defaults on an agreement or an agreement has been terminated. The Small Business/Self-Employed (SB/SE) division administers the IA program.

(3) A direct debit installment agreement automatically debits the taxpayer's bank account for a monthly transfer to the IRS on a date pre-selected by the taxpayer. These agreements have a lower user fee compared to non-direct debit agreements and the fee is waived for low-income taxpayers.

(4) An online payment agreement is established by the taxpayer at IRS.gov. The fee is lower than the fee charged when a taxpayer applies using other methods (phone, mail or in-person) because online payment agreements do not require employee assistance.

(5) A voice balance due agreement is established by the taxpayer through the automated phone service. The fee is lower than the fee charged when a taxpayer applies using other methods (agreements established with live phone assistance, by mail or in-person) because voice balance due agreements do not require employee assistance.

(6) Taxpayers with incomes at or below 250% of the Department of Health and Human Services poverty guidelines, which are adjusted and published annually, qualify for a reduced low-income user fee. User fees are waived for low-income taxpayers entering into IAs on or after April 10, 2018, if they agree to make electronic payments through a direct debit IA. Low-income taxpayers who indicate they are unable to make electronic payments through a debit instrument will receive a reimbursement of the reduced user fee upon completion of the IA. A low-income taxpayer will not be reimbursed for the user fee if the IA is terminated. Low-income taxpayers are identified systemically using their most recently filed tax return. Taxpayers who are not identified as low-income, but believe they meet the requirements for low-income status, must complete Form 13844, Application for Reduced User Fee for Installment Agreements, within 30 days of receipt of the IA acceptance letter.

(7) The IRS receives IA fees with installment tax payments through a lockbox or the Electronic Federal Tax Payment System. The CFO Revenue Accounting and Control System (RACS) units record the payments in RRACS as tax revenue. The IA fees and the tax payments are not separately identifiable, so a separate process reclassifies user fee collections from tax revenue to record the IA user fee revenue.

(8) The IRS IT division staff executes a weekly automated utility program, the IA User Fee Sweep Program, to reclassify the Integrated Data Retrieval System IA user fee collections from tax revenue to user fee revenue. The program reviews all tax modules in the taxpayer’s account in IA status and verifies a user fee has been received. If not, the program looks for subsequent tax payments sufficient to pay the user fee. If sufficient payments have been received, the program transfers the user fee amount from the tax module to the user fee module, reversing the tax payment and recording the user fee payment.

(9) The IT division staff provides the Cost and User Fees office a weekly report that details the volume of user fees collected from the weekly sweep program and a monthly master file report with detailed revenue data. Accountants in the Cost and User Fees office reconcile the data with the RRACS revenue, compare the volume with the previous year and expected year-to-date volumes, and research unexpected variances.

(10) Each October, the Cost and User Fees office estimates the tax revenue received in the prior fiscal year that will be reclassified as user fee revenue in the current fiscal year during the sweep process and records an accrual entry, if necessary.

(1) The IRS charges a fee to recover the cost for reviewing and processing an Offer in Compromise (OIC) settlement. The IRS must set the fees at full cost or obtain a waiver from OMB. IRM 1.33.7.3

(2) An OIC is an agreement between a taxpayer and the IRS that settles a tax liability for less than the full amount owed. The IRS accepts an OIC when there is doubt as to liability or collectibility, or where acceptance would promote effective tax administration. The SB/SE division administers the OIC program.

(3) Taxpayers submit Form 656, Offer in Compromise, and pay the appropriate application fee (user fee) stated on the form. Taxpayers meeting the IRS low-income guidelines are exempt from the application fee. The application fee is not required with a Doubt as to Liability OIC.

(4) The IRS retains the user fee for a processable OIC, except where the offer is accepted under Effective Tax Administration or Doubt as to Collectibility with Special Circumstances – Economic Hardship criteria. The IRS returns the taxpayer’s check for the user fee and any deposits if the OIC is not processable.

(5) The Brookhaven and Memphis campuses receive OIC user fees, which are initially recorded in master file and RRACS as payments against the taxpayer’s debt. During weekly processing, the IT division runs a program that summarizes the payments and generates a journal entry at the general ledger level, reducing the RRACS general ledger account balance for tax receipts and increasing the OIC user fee account for the fees.

(6) The IT division provides a monthly master file detail report of user fee transactions to the Cost and User Fees office to analyze and identify all payments that do not equal the user fee amount. Non-matching payments are sent to SB/SE for correction.

(1) The IRS charges a fee to recover the cost of issuing estate tax closing letters upon request of taxpayers. The IRS must set the fees at full cost or obtain a waiver from OMB. IRM 1.33.7.3

(2) Upon request of a decedent’s estate, the IRS will issue an estate tax closing letter after an estate tax return (generally, Form 706) has been accepted by the IRS with any necessary adjustments. The letter documents that the estate tax return has been accepted by IRS. Although there is no requirement for an estate to secure this letter, it provides relevant information that can facilitate the final division and distribution of estate assets. The SB/SE division administers the estate tax closing letter program.

(3) The IRS receives estate tax closing letter requests and the associated user fees through Pay.gov.

(1) The IRS charges a fee for providing taxpayers with requested copies or transcripts from audio recordings initiated by IRS for an in-person interview. The fee must cover the cost of any requested transcription and reproduction. IRM 1.33.7.4

(2) The Service can initiate an audio recording provided it notifies the taxpayer ten calendar days in advance of the interview using Letter 2156, Recording Interviews. IRM 4.10.3.3.6(4)

(3) Transcription and reproduction costs are calculated for each request; costs vary based on factors such as interview length and vendor rates.

(4) The SB/SE division receives the requests with payments and submits the payments to Government Payables and Funds Management for deposit.

(1) The IRS charges a fee to recover the cost for managing the enrolled actuary program. The IRS must set the fees at full cost or obtain a waiver from OMB. IRM 1.33.7.3

(2) Enrolled actuaries have satisfied the qualification requirements established by the Joint Board for the Enrollment of Actuaries, which approves individuals to perform actuarial services before the IRS under the Employee Retirement Income Security Act of 1974. The Return Preparer Office administers the enrollment program.

(3) Individuals seeking enrollment must satisfy knowledge and experience requirements.

(4) Individuals seeking enrollment are subject to a tax compliance check.

(5) Enrolled actuaries renew their enrollment every three years using Form 5434-A, Application for Renewal of Enrollment.

(6) The IRS receives applications, renewal forms and fees through Pay.gov, the U.S. Postal Service and other private mail carriers.

(1) The IRS charges a fee to recover the cost for processing new enrolled agent applications and renewals. The IRS must set the fees at full cost or obtain a waiver from OMB. IRM 1.33.7.3

(2) Enrolled agents are individuals who successfully completed the Special Enrollment Examination process or who qualified based on prior IRS employment and have been approved to practice before the IRS. The Return Preparer Office administers the enrolled agent program and grants permission to practice before the IRS.

(3) Individuals seeking enrollment are subject to a tax compliance check.

(4) Individuals who pass the Special Enrollment Examination are provided an enrollment card, which must be renewed with the IRS every three years. Enrolled agents must register for a preparer tax identification number, which must be renewed annually.

(5) The IRS receives applications and fees through Pay.gov, the U.S. Postal Service and other private mail carriers.

(1) The IRS charges a fee to recover the cost for overseeing the administration of the Special Enrollment Examination, including developing and approving examination questions, recording test results and managing the program. The IRS must set the fee at full cost or obtain a waiver from OMB. IRM 1.33.7.3

(2) The Special Enrollment Examination is administered by a vendor that schedules the examination and collects the user fee.

(3) Individuals pay a user fee each time they sit for a part of the Special Enrollment Examination.

(4) The vendor that administers the examination submits the Special Enrollment Examination user fees to the IRS through Pay.gov.

(1) The IRS charges a fee to recover the cost of administering the preparer tax identification number (PTIN) application and renewal program. The IRS must set the fee at full cost or obtain a waiver from OMB. IRM 1.33.7.3

(2) Anyone who prepares or substantially helps to prepare any federal tax return or claim for refund of compensation must have a valid IRS PTIN, which is renewed annually beginning in October for the next filing season.

(3) The PTIN applications and renewals are processed through a third-party contractor that also collects the IRS user fee and a separate contractor fee.

(4) The contractor that processes the applications and renewals submits the PTIN user fees to the IRS through Pay.gov.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the cost for performing an advanced art valuation. IRM 1.33.7.5

(2) Taxpayers can request art valuations for income, estate or gift tax purposes. The Office of Art Appraisal Services under the chief, Appeals, reviews the fair market value claims on works of art and issues a Statement of Value. Taxpayers can rely on the Statement of Value for completing tax returns if the statements are based on facts

(3) A taxpayer seeking a Statement of Value:

1. Submits a copy of a qualified appraisal of the art item(s);

2. Pays the user fee;

3. Completes and submits an appraisal summary; and

4. Identifies the jurisdiction for examination of the taxpayer's tax return

(4) Advanced art valuation determination fees are collected through Pay.gov.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the cost for providing rulings and determination letters. IRM 1.33.7.5

(2) Chief Counsel provides letter rulings, closing agreements and determination letters to taxpayers upon request.

(3) Taxpayers pay the user fee on Pay.gov and submit a copy of the payment voucher with their requests for letter rulings or determinations.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the cost for providing employee plans and exempt organizations with determinations letters, information letters and other guidance. IRM 1.33.7.5

(2) The TE/GE division provides letter rulings, determination letters, information letters and other guidance for employee plans and exempt organizations. The Cost and User Fees office maintains a list of the various fee categories and rates.

(3) The TE/GE division receives fees at the Cincinnati Submission Processing Center and through Pay.gov.

(4) The Cincinnati Submission Processing Center deposits payments through the deposit function and the CFO RACS unit records user fee deposits in RRACS.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the cost for providing a taxpayer with pre­ filing agreements, federal excise tax exemptions, tax treaty limitation of benefits interpretations and advanced pricing agreements. IRM 1.33.7.5

(2) Taxpayers serviced by LB&I can request a pre-filing agreement, which is consideration of an issue before filing a tax return. The LB&I division sends a user fee invoice to the taxpayer if the request is accepted. The taxpayer submits payment for the user fee to Pay.gov or to the Government Payables and Funds Management office, which notifies LB&I of receipt.

(3) The LB&I division receives requests from taxpayers for federal excise tax exemptions and tax treaty limitation of benefits interpretations through a PO Box or through Pay.gov.

(4) Taxpayers may request an advanced pricing agreement to resolve actual or potential transfer pricing disputes as an alternative to the traditional examination process. The LB&I division receives transfer pricing agreements requests and user fees through a PO Box or Pay.gov.

(5) Payments received through a PO Box are mailed to Government Payables and Funds Management for deposit.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the cost for providing taxpayers with a U.S. residency certification. IRM 1.33.7.6

(2) A U.S. residency certification confirms a person is a U.S. resident who files a U.S. tax return. Some income tax treaties between the U.S. and foreign countries can reduce withholding from certain types of income paid to U.S. residents. Treaty partners sometimes require the IRS to certify residency of the individual claiming treaty benefits.

(3) To receive a letter of U.S. residency certification, taxpayers file Form 8802, Application for United States Residency Certification, and submit the appropriate user fee to the IRS.

(4) The IRS receives U.S. residency certification user fees through Pay.gov.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the cost for administering the Income Verification Express Service (IVES) program for approved customers who have signed up for this service. IRM 1.33.7.6

(2) The IVES program provides taxpayer transcripts to customers within two business days. Users fax Form 4506-T, Request for Transcript of Tax Return, signed by the taxpayer, to the campuses that process the request through the Transcript Delivery System.

(3) The IRS records IVES user fees using the accrual basis of accounting. The Transcript Delivery System transmits the transcripts to customers during the month, interfacing with IFS at month-end to generate invoices based on the number of transcripts provided and to record revenue and receivables.

(4) Approved customers pay electronically via debit or credit card through Pay.gov. The Financial Management Systems office pulls an IVES report from Pay.gov and uploads the report into IFS daily. This process records customer payments and reverses receivables.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the cost for photocopying a taxpayer's individual and/or business tax return. IRM 1.33.7.6

(2) Taxpayers can obtain copies of their tax returns and attachments for the current year and three prior years by submitting Form 4506, Request for Copy of Tax Return.

(3) The campuses receive payments for photocopy user fees and the CFO RACS units record the fees in RRACS as user fee revenue.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the costs for providing an electronic copy of an exempt organization tax return to a taxpayer. IRM 1.33.7.7

(2) The Ogden campus receives requests and payments for copies of exempt organization tax returns.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the costs for creating and providing taxpayers with public use files requested by the public. IRM 1.33.7.8

(2) The public use files are micro-data files produced every two years and statistically modified to prevent the disclosure of individual taxpayer data.

(3) Taxpayers submit a written request to the Statistics of Income division to purchase a file. Pricing is for the specific file (i.e., a request for a prior file is charged at that file’s rate), rather than the user fee in effect for the current file.

(4) The Statistics of Income division receives payments through Pay.gov or a PO Box and sends any paper checks received to the Government Payables and Funds Management office for processing.

(1) The IRS charges a fee, which may be less than full cost, to recover the costs for providing a copy of a written determination to a taxpayer. IRM 1.33.7.9

(2) The IRS provides taxpayers with copies of written determination background file documents.

(3) Taxpayers submit written requests to Chief Counsel, who estimates the cost of providing the service and sends a payment agreement to the taxpayer. Chief Counsel processes the request after the payment has been received.

(4) Chief Counsel receives payments through Pay.gov and matches payments to the submitted applications.

(1) The IRS charges a fee set at $500 by legislation for the historical conservation easement charitable deduction. IRM 1.33.7.10

(2) A taxpayer who claims the historical conservation easement charitable deduction on his or her tax return must pay a user fee and submit Form 8283, Noncash Charitable Contributions, along with the fee.

(3) The IRS receives the user fee through the Government Payables and Funds Management office through Pay.gov.

(4) The Government Payables and Funds Management office notifies the Ogden Campus to record the transaction on the master file taxpayer's record.

(1) The IRS charges a reasonable fee, which may be less than full cost, to recover the costs for providing taxpayers with information that falls under the FOIA. IRM 1.33.7.11

(2) The FOIA mandates public access to the records of federal agencies unless the information involved is protected from disclosure by one of FOIA's nine exemptions or three exclusions. The Office of Privacy, Governmental Liaison and Disclosure administers the FOIA program.

(3) 5 USC 552, Public information, agency rules, opinions, orders, records, and proceedings, requires federal agencies to impose reasonable standard fees to recover direct costs except when the information disclosed is in the public's interest. Agencies are precluded by law from imposing fees if the cost of collection exceeds the amount collected.

(4) The taxpayer agrees to pay FOIA fees in advance if the cost to process a FOIA request is estimated to exceed $250 or if the requester failed to pay prior fees in a timely fashion.

(5) Privacy, Governmental Liaison and Disclosure (PGLD) receives FOIA user fees through a PO Box and forwards the payments to the Government Payables and Funds Management office via overnight mail. IRM 11.3.5, Disclosure of Official Information, Fees

(1) The IRS charges an annual fee not to exceed $1,000 per year for certifying professional employer organizations under PL113-295, section 7705. IRM 1.33.7.12

(2) Organizations apply for certification, which allows them to be treated as the employer of any individual performing services covered by a contract meeting certain requirements.

(3) The SB/SE division receives the certification fees through Pay.gov.

(1) The IRS charges a fee calculated by the HHS to cover the costs of HHS administering the Federal IDR cases on behalf of IRS for health plans subject to the Internal Revenue Code, including church plans and either partially or fully self-insured private (employment-based) group health plans, as authorized by the No Surprises Act. IRM 1.33.7.13

(2) HHS remits the administrative fees collected from the dispute case participant(s) to IRS by reclassifying or directly recording the collections to the appropriate Treasury receipt account.

(3) The IRS reimburses HHS, in an amount equal to the administrative fees collected by HHS and remitted to IRS, for providing the service of carrying out the Federal IDR process for health plans subject to the Internal Revenue Code in accordance with a Memorandum of Understanding between the HHS Center for Consumer Information and Insurance Oversight and the IRS.