Getting a break from the Internal Revenue Service is about to get a lot more expensive.
The IRS has announced a huge increase in fees to rule on cases relating to individual retirement accounts and other retirement plans. The hike takes effect Feb. 1.
One case that can trip up taxpayers is rolling funds from a 401(k) to an IRA, which must be done within 60 days of leaving an employer or the distribution becomes taxable. If a person misses this deadline, the IRS can waive the rule and allow the transaction to go through.
Requesting that permission has cost $95 but the price will soar to $3,000 for transactions involving $100,000 or more -- a number not uncommon for long-tenured workers. Rulings for rollovers of less than $50,000 will cost $500, and the bill will be $1,500 for accounts valued between $50,000 and $100,000.
"Now the IRS fees are higher than mine," said Ed Slott, a Rockville Centre, N.Y., accountant and IRA specialist.
The new rates better reflect the costs associated with rulings on such cases, IRS spokesman Kevin McKeon said. People earning less than $250,000 pay reduced fees for certain rulings, he noted.
"This affects a very limited population of taxpayers and tax-exempt entities," McKeon said.
The higher fees, however, may mean that people will be less willing to request a waiver and instead wait to see whether the IRS catches the error, said Ronald Finkelstein, a partner at Marcum & Kliegman, an accounting firm with offices in Melville, N.Y., and Manhattan.
"They may want to take the chance that the IRS won't notice," Finkelstein said.
With the cost of a mistake going up, account holders should make sure their money is being handled properly, the accountants said.