The Internal Revenue Service (IRS) offers installment agreements as a flexible payment option for taxpayers who are unable to pay their tax debts in full. However, the IRS may reject an installment agreement request for various reasons. This comprehensive guide will delve into the reasons for IRS installment agreement rejection and provide a detailed overview of the appeals process available to taxpayers.
Reasons for IRS Installment Agreement Rejection
The IRS typically rejects an installment agreement request for one of three primary reasons:
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Unnecessary Living Expenses: The IRS scrutinizes living expenses to ensure that they fall within the category of “necessary.” Extravagant expenses, such as charitable contributions, private school tuition, and excessive credit card payments, may lead to the rejection of an installment agreement.
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Inaccurate Information: Providing inaccurate information on Form 433-A, Collection Information Statement, can result in the rejection of an installment agreement. This form requires detailed information about the taxpayer’s financial situation, and any discrepancies or omissions may raise red flags for the IRS.
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Default on Previous Installment Agreement: If a taxpayer has defaulted on a previous installment agreement, the IRS may be hesitant to approve a new agreement. Defaulting on an installment agreement indicates a lack of reliability and may make the IRS less willing to extend further payment flexibility.
The IRS Appeals Process
If the IRS rejects an installment agreement request, taxpayers have the right to appeal the decision. The IRS appeals process is designed to provide taxpayers with an opportunity to present their case and potentially overturn the rejection.
Steps in the Appeals Process:
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Request for Reconsideration: The first step is to request a reconsideration of the rejection decision. This can be done by contacting the collections manager directly and explaining the reasons why the installment agreement should be approved.
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Formal Appeal: If the reconsideration request is unsuccessful, taxpayers can file a formal appeal with the IRS Appeals Office. This involves submitting a written request that outlines the grounds for the appeal and provides supporting documentation.
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Appeals Hearing: The taxpayer will have the opportunity to present their case at an appeals hearing. An appeals officer will review the taxpayer’s financial situation, consider their arguments, and make a final decision on the installment agreement request.
Tips for a Successful Appeal
To increase the chances of a successful appeal, taxpayers should:
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Gather Supporting Documentation: Provide detailed documentation to support the necessity of living expenses, accuracy of financial information, and any mitigating circumstances that may have contributed to the default on a previous installment agreement.
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Be Prepared to Negotiate: The appeals officer may be willing to negotiate the terms of the installment agreement, such as the monthly payment amount or the repayment period.
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Consider Professional Representation: An experienced tax attorney or enrolled agent can provide valuable guidance and representation throughout the appeals process, increasing the likelihood of a favorable outcome.
While the IRS may reject an installment agreement request, taxpayers have the right to appeal the decision. By understanding the reasons for rejection and following the outlined appeals process, taxpayers can increase their chances of obtaining an installment agreement that meets their financial needs. Remember, the IRS is willing to work with taxpayers who are facing financial hardship, and the appeals process provides a valuable opportunity to resolve tax debt issues amicably.
If You Can’t Pay The IRS – Your OPTIONS & IRS Payment Plan Explained
FAQ
What voids an IRS payment plan?
What is the minimum payment the IRS will accept?
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Tax debt
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Minimum monthly payment
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$10,000 or less
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Sufficient amount to pay off your debt in less than 3 years
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$10,000 to $25,000
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Total debt divided by 72
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$25,000 to $50,000
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Total debt divided by 72
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More than $50,000
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No set minimum
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Why did the IRS reject my payment?
How many months will the IRS let you make payments?
Does the IRS have a payment plan?
Yes, the IRS has a payment plan, but it has caveats. The IRS’s installment agreement includes short-term payment plans up to 180 days, as well as long-term plans known as installment agreements to pay your tax bill down in a couple of years. What is the IRS installment agreement?
What happens if I don’t pay my taxes?
By law, the IRS may assess penalties to taxpayers for both failing to file a tax return and for failing to pay taxes they owe by the deadline. If you’re not able to pay the tax you owe by your original filing due date, the balance is subject to interest and a monthly late payment penalty.
What if I don’t qualify for an online payment plan?
If you don’t qualify for an online payment plan, you may also request an installment agreement (IA) by submitting Form 9465, Installment Agreement Request PDF, with the IRS. If the IRS approves your IA, a setup fee may apply depending on your income. Refer to Tax Topic No. 202, Tax Payment Options.
Should I set up a payment plan with the IRS?
Setting up a payment plan with the IRS can help you get back on track with what you owe. An IRS payment plan — also known as an installment agreement — is an agreement to pay a federal tax debt within a specific time frame. Depending on how much you owe, you can opt in to a short-term or long-term payment plan for owed taxes.