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Denied IRS Payment Plan: Exploring Your Alternatives

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Alisson Ward

Tax Professional | Content Writer

A middle-aged Caucasian man sitting at a home office desk, looking sad and contemplative. He holds a rejected IRS payment plan letter in one hand.

Understanding the IRS Payment Plan Denial

When your IRS payment plan application gets denied, it’s crucial to understand the specific reasons behind the denial. This understanding will help you address the issues and increase your chances of a successful resolution.

Here are some common reasons why the IRS may deny your payment plan:

Incomplete Information

The IRS requires specific information and documentation when you apply for a payment plan. If your application was missing any of these required elements or if the information provided was incomplete or inaccurate, it could lead to a denial. Therefore, it’s essential to ensure that your application is comprehensive and accurately reflects your financial situation.

Inadequate Payment Proposal

One of the primary reasons for denial is an inadequate payment proposal. The IRS assesses whether your proposed monthly payments are sufficient to cover your tax debt within a reasonable timeframe. If they determine that your proposed payments won’t pay off the debt within their guidelines, your plan may be denied. To avoid this, carefully calculate your proposed payments and make sure they align with your ability to pay while meeting the IRS requirements.

Non-Compliance

If you have a history of non-compliance with tax obligations, such as failing to file required tax returns or having other outstanding tax debts, the IRS may deny your payment plan application. It’s essential to address any outstanding compliance issues before applying for a payment plan. Ensure that all necessary tax returns are filed and any outstanding tax liabilities are addressed.

Failure to Make Current Payments

If you miss payments on your existing payment plan while applying for a new one, this can result in denial. It’s crucial to continue making payments as agreed in your current plan until a decision is made on your new application.

Your Options After a Denied IRS Payment Plan

Option 1: Amend Your Proposal

If your payment plan was denied due to inadequate payments, you have the option to amend your proposal. Consider these steps:

  • Reassess Your Budget: Review your financial situation and determine if you can increase your monthly payments.
  • Provide Additional Documentation: Ensure all required documentation is included with your amended proposal.

Option 2: Explore an Offer in Compromise (OIC)

An Offer in Compromise is an agreement with the IRS to settle your tax debt for less than the full amount owed. To qualify, you must demonstrate that paying the full debt would create financial hardship. Priority Tax Relief can assist you in preparing a compelling OIC.

Option 3: Request a Temporary Delay

If your financial situation is temporarily dire, you can request a delay in collections. The IRS may grant you additional time to get back on your feet.

Option 4: Appeal the Decision

If you believe the denial was in error or due to a misunderstanding, you can appeal the decision. Priority Tax Relief can guide you through the appeals process.

Conclusion

A denied IRS payment plan doesn’t mean the end of the road in resolving your tax debt. There are viable alternatives to explore, and with the right guidance and support, you can find a solution that works for you. Priority Tax Relief is here to assist you in your journey to financial recovery. Don’t let a setback deter you – explore your options and regain control of your tax obligations today.

Frequently Asked Questions:

Why would the IRS deny a payment plan?

The IRS might deny a payment plan if you have incomplete tax filings, owe for multiple periods, or lack consistent compliance with tax laws.

Disqualifications include not filing required tax returns, previous default on another payment plan, or insufficient income to meet minimum payments.

If a payment is rejected, you may face additional penalties and interest, and must arrange another payment method quickly to avoid further consequences.

Obtaining a payment plan can be straightforward if you owe less than $50,000 and are up-to-date on tax filings.

The IRS may cancel an agreement if you miss payments, fail to file subsequent tax returns, or do not pay subsequent taxes on time.

Payments can be rejected for reasons like insufficient funds, incorrect account information, or bank errors.

Setting up a plan isn’t typically difficult, especially for smaller debts and if you can make consistent payments.

The IRS accepts various payment amounts, but your specific terms depend on how much you owe and your ability to pay.

A declined tax payment can lead to added penalties and the need for immediate alternative payment arrangements.

If a payment fails, the IRS will notify you, and you’ll need to submit a new payment or face potential penalties and interest.

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