The IRS accepts payment plans, also referred to as installment agreements, for taxpayers who cannot pay their taxes in one full lump sum, but it requires an application that needs approval first. In some cases, the IRS will deny the approval of a payment plan to taxpayers who do not meet IRS qualifications, or provide an inadequate payment plan proposal.
Tax relief services can help individuals file applications for payment plans through the help of a team of tax professionals. However, understanding why an application could get denied is also crucial to planning how to avoid it, or re-strategize post-denial.
Why Would the IRS Deny a Payment Plan?
The IRS could deny the approval of a payment plan application for a multitude of reasons including inadequate or incomplete information on the proposal, a history of non-compliance, and failure to make current payments.
Before filing an application with the IRS, it’s best to consult with a professional tax consultant who can guide you through the process and ensure that you are not missing any information. This can save you from needing to handle the issue of an IRS denial, which can prolong the process of getting a payment plan approved and started. They can also deny a payment plan if they see an ability to collect the debt you owe in full.
Incomplete Information
The IRS requires specific information and documentation when you apply for a payment plan. If you owe $50,000 or less, financial documentation is not required. However, you must include your basic personal information, like name and SSN, on the application. If you owe over $50,000 in taxes, penalties, and interest, you will need to complete Form 433-F, Form 9465 (if applying by mail), and supporting documentation to show proof of the numbers on your financial statements. This can include recent pay stubs and bank statements.
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. If you are unsure if you are providing the right information that the IRS requires, consult with a tax professional for help properly completing your application
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 resolved.
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) or Other Settlement Options
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. You can also apply for a partial pay installment agreement to pay less than the total debt. Which option is best depends on the specifics of your case, which is why we specialize in evaluating Collection Information Statements to determine the best path for you.
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.
Does a Denial Mean that I Am Ineligible for a Payment Plan?
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 consists of a team of CPAs, tax consultants, and tax attorneys who are here to help taxpayers find a solution to their tax debt. Using a Tax Help Hotline that offers direct communication with the IRS, taxpayers will be able to complete and submit applications to the IRS for payment plans with confidence. Contact us today for a consultation.
