For taxpayers who find themselves unable to pay their tax liability in one lump sum, the IRS offers installment agreements as a solution that is beneficial to both the taxpayer and to the IRS. In some cases, the IRS will automatically accept an application for an installment agreement if the taxpayer’s situation is simple and their debt is below a prescribed threshold. However, for taxpayers with large amounts of tax debt and more complex financial circumstances, an installment agreement is not guaranteed. Below, we’ll explain why the IRS typically rejects requests for installment agreements and what a taxpayer can do if that happens.
Why the IRS Rejects Requests for Installment Agreements
The IRS can reject a request for an installment agreement for many reasons, but some of the most common are:
- You provided false, misleading, or incorrect information on your application: When you apply for an installment agreement, you must disclose a great deal of financial information to the IRS on your Collection Information Statement. Underreporting your income or making mathematical errors can delay the process or even lead to your application being rejected.
- You have the ability to fully or partially pay down your tax debt: If you have the cash to pay your tax liability or you have equity in assets that can be borrowed against or liquidated, the IRS likely will reject your application for an installment agreement and recommend that you pay in cash or borrow against your equity first.
- You present a bad deal to the IRS: While installment agreements are intended as a form of debt relief for taxpayers, they are also tools that the IRS uses to collect debts. For example, if your installment agreement request includes living expenses which are considered excessive, the IRS may reject it.
- You have a history of defaulting on agreements with the IRS: A history of defaulting on previous installment agreements hurts your case, and the IRS may reject your application if it believes that you are likely to do so again.
What to Do if Your Request is Rejected
The most important thing to remember is that hope is not lost if the IRS rejects your request. There are a few options available for taxpayers in these scenarios, including:
- Continuing to negotiate: If your first attempt to negotiate is unsuccessful, you may be able to continue the process by speaking with a manager. There is a chain of command at the IRS, and it could be to your advantage to work your way up it.
- Appealing your rejection to the IRS Office of Appeals: The IRS’s Office of Appeals is an independent, impartial agency within the IRS whose mission is to resolve tax disputes in a manner that will enhance voluntary compliance. If your installment agreement application is rejected, you have 30 days from the date of rejection to file a Collection Appeal Request for reconsideration before the IRS may levy your assets.
- Pursing alternative tax debt relief programs: Installment agreements are not the only tax debt relief programs available to taxpayers. You may also want to consider an offer in compromise, seeking Currently Not Collectible status, or filing for bankruptcy.
Get Help With Tax Problems in Boca Raton
If the IRS rejected your request for an installment agreement or you have any questions or concerns about installment agreements generally, you should enlist the assistance of a qualified tax professional. To get help with tax problems in Boca Raton and elsewhere throughout the country, contact the tax consultants at the East Coast Tax Consulting Group by filling out our online form or calling us at 866-550-7655.