Many taxpayers owe taxes to the Internal Revenue Service (IRS), but they do not have the immediate funds to pay off this liability. A possible solution to this problem is to enter into an installment agreement. Taxpayers can submit an installment agreement proposal to the IRS. However, the IRS does not always accept these proposals. If the IRS rejected your proposal, Damiens Law can discuss the steps to appeal the rejection of your IRS installment agreement. Consider contacting Damiens Law in our Mississippi office at (662) 442-4423 or our Tennessee office at (901) 499-4466.
What is an installment agreement?
Not paying taxes you owe can result in an IRS tax levy and other consequences. An installment agreement with the IRS allows you to pay the amount of taxes you owe to the IRS within an extended timeframe. With an installment agreement, you agree to pay a certain amount of money to the IRS per month for a specific term. If you believe that you can pay the taxes in full within the extended timeframe, you can request an installment agreement.
Requirements of an installment agreement
According to 26 CFR § 301.6159-1, the tax commissioner must accept an installment agreement if all of the following conditions apply:
- The amount of tax liability (excluding interest, penalties, and additional amounts) is $10,000 or less
- The taxpayer has not failed to file a tax return within the last five taxable years
- The taxpayer has not failed to pay any required income tax within the last five taxable years
- The taxpayer has not entered into an installment agreement to pay income tax within the last five taxable years
- The tax commissioner determines the taxpayer is financially unable to pay the liability in full when it is due
- The taxpayer submits any information required by the tax commissioner to make the determination that the taxpayer is financially unable to pay the liability in full when due
- The installment agreement provides for full payment of the tax liability within three years
- The taxpayer agrees to comply with the Internal Revenue Code’s provisions for when the installment agreement is in effect
Common reasons the IRS rejects installment agreements
Some common reasons when the IRS rejects installment agreement proposals are:
- Taxpayer cannot afford the installment agreement – The IRS determines that the taxpayer cannot afford to pay the tax liability within the term of the installment agreement.
- Taxpayer did not complete Form 433 – Taxpayers must complete Form 433-A, Collection Information Statement to provide information about their financial situation to the IRS. If they do not complete this form, skip sections, or provide inaccurate information, the IRS may reject the application.
- The taxpayer has unnecessary expenses – An installment agreement is intended to allow a taxpayer to continue paying their necessary living expenses while also paying off their tax debt in a timely manner. The IRS may reject an installment agreement if they believe that the taxpayer has unnecessary expenses, which they might consider as private school tuition, high car payments, charitable contributions, and large credit card payments.
- Proposed monthly payment too low – The IRS wants to be assured that you will pay off your tax debt in full. The monthly payment is usually based on the unpaid balance, but other factors may also influence it. If the taxpayer requests an installment agreement with a low monthly payment, the IRS may reject the proposal. Generally, the proposal must show that the taxpayer can pay off the tax debt within three years.
- The statute of limitations is approaching – The IRS is bound by a time limit in which they can legally collect owed tax debt, known as the statute of limitations. If the collection period’s end is nearing, the IRS may reject the proposal, require the taxpayer to pay off the debt more quickly, or require the taxpayer to waive the collection expiration.
- Missing information – If the installment agreement does not contain sufficient information to allow the IRS to evaluate whether the proposal should be accepted, the IRS might reject the proposal.
- Failure to provide requested information – The taxpayer failed to provide additional information to the IRS to allow it to evaluate whether the proposal should be accepted upon request.
- Poor compliance history – If the taxpayer defaulted on a previous installment agreement, the IRS might reject a new installment agreement proposal.
What to know about the appeals process
If you are considering entering into an installment agreement, you may want more information about the appeals background. The appeals process is an independent body of the IRS, distinct from examinations and collections. The purpose of the appeals process is to resolve disputes in a mutually beneficial way.
Many appeals officers are former collection agents or auditors. They generally have a strong understanding of tax laws and policies. They often have greater flexibility in resolving disputes. Appeals officers make objective decisions independently of the auditor or tax collector.
The appeals process works like informal mediation. However, there are no collections agents or managers. The appeals officer reviews the government’s position based on their collection report and other official documentation.
The taxpayer has a right to have legal representation during the appeals process. If you are experiencing this appeals process, consider visiting with an experienced tax attorney at Damiens Law.
How to appeal the rejection of your IRS installment agreement
If the IRS rejects your proposal for an installment agreement, you have the right to appeal the rejection of your IRS installment agreement. You can complete this process by following these steps:
Call the IRS
You should receive a letter from the IRS notifying you of the rejection. There should be a phone number on the letter. Start by calling the number listed in the letter. Explain to the IRS representative why your installment agreement should be approved. For example, if there is an error on the form, you may be able to clear up this misunderstanding, make corrections, and have the installment agreement approved.
Expedite the call
If the representative still refuses to accept the installment agreement, ask to talk to their manager. If that does not work, ask to speak to a collections manager. Explain the situation to the manager.
Complete Form 9423
If your attempts up to this point fail, you will need to prepare a written appeal. Complete Form 9423, Collection Appeal Request. On this form, you will need to provide information, including:
- Your name
- Contact information
- Social Security Number or Employer Identification Number
- Type of tax owed
- Tax amount due
- Tax periods being appealed
- The type of collection actions being appealed
- An explanation of why you disagree with the decision to reject the installment agreement
- Your date and signature
Also, read the instructions and notice of rights contained in the form.
You must submit this form within 30 days from the decision date listed on the letter for the IRS to consider it.
Accept the decision
Finally, you will wait for the written decision by the IRS. The appeal decision is binding. Therefore, if the Office of Appeals rejects the appeal, you cannot appeal again.
How a tax lawyer can help
If you are considering entering into an installment agreement, you may want legal representation to help you with this process. A lawyer can evaluate your particular situation and determine your possible options. A tax lawyer can discuss whether an installment agreement is actually the best path forward, or if alternatives would be better suited to your case. For example, you may be able to make an offer in compromise or a partial payment installment agreement instead. These options may allow you to resolve your tax debt for less than you owe, but they must meet certain requirements.
A tax lawyer can assist you with the initial application for an installment agreement and ensure that the proposal meets all requirements.
Review of rejection notice
If the IRS rejects your installment agreement proposal, a tax lawyer can review the rejection notice. They can contact the IRS on your behalf and attempt to resolve the issue informally. They may be able to submit additional information or make corrections so that the agreement is approved.
File a formal appeal
If these tactics do not work to get your installment agreement approved, a tax lawyer can complete a formal appeal. Since the appeal decision is the final decision, having a knowledgeable tax lawyer complete your appeal for you may give you peace of mind knowing that a legal professional is handling the situation. Damiens Law has extensive experience representing clients with tax appeals.
Contact Damiens Law with help to appeal the rejection of your IRS installment agreement
If you are considering submitting an installment agreement with the IRS, note that there is a chance the IRS will reject it. If your installment agreement is rejected, you may be considering working with a tax lawyer with Damiens Law. Our experienced tax lawyers can explain how to appeal the rejection of your IRS installment agreement and how we can assist with this process. Damiens Law has offices in Mississippi and Tennessee. You can contact us for a confidential case review by calling (662) 442-4423 or (901) 499-4466.