An IRS installment agreement is an optimal solution for reducing the amount of debt you owe to the IRS. If you have completed all of the forms, pulled together and documentation and filed your application, all you have to do is wait. We understand how difficult it is to be patient and that the IRS is not exactly known for their speedy responses.
If you finally hear back from the IRS to be informed that your installment agreement proposal was rejected, we feel your pain. You feel disappointed, angry, and scared … now what? Is the IRS going to start hounding you again? Most likely.
The good news is that you can appeal the rejection of your installment agreement request. The IRS has an appeals process that is available to taxpayers, so you can fight back. Your best recourse is to consult with an experienced tax attorney who understands how the appeals process works and can represent you throughout the process.
In this section, I will explain why the IRS rejects installment agreement requests and walk you through the appeals process. Keep reading!
Why the IRS Rejects Installment Agreement Requests
The IRS typically rejects an installment agreement request for one of three reasons. If the IRS determines that your living expenses do not fall under the category of “necessary,” your agreement will more than likely be rejected. The IRS considers extravagant expenses as those that include charitable contributions, private school funding and hefty credit card payments.
In addition, if you fail to provide accurate information on Form 433-A, Collection Information Statement, you can expect your agreement to be rejected. Lastly, if you defaulted on a previous installment agreement, your new proposal may receive skepticism and be subsequently rejected.
To resolve this hurdle, contact the collections manager and speak with him or her directly. “Just making this request is sometimes enough to soften the collector up. If you get nowhere with the manager, you can go over his or her head – everyone at the IRS has a boss. You can complain to [his or] her immediate boss, then the collections branch chief, and then the district director” (Avvo.com, “What to do if the IRS Rejects Your Installment Agreement Plan Proposal,” 8/21/2013).
What is the IRS Appeals Process Like?
The IRS appeals process is actually reasonably friendly to taxpayers. First of all, technically, the function of appeals is to be an independent body of the IRS separate from examinations and collections.
The sole function of appeals is to resolve disputes between the taxpayers and the government and to do so in a mutually beneficial way.
The most common time we run into appeals is usually with respect to when we are filing a tax court petition and trying to work things out through appeals. Most of our audits that we do at the firm will file a tax court petition for and then we will try and negotiate with appeals.
The benefit of dealing with appeals is that most of the appeals officers are either former collection agents or they are former auditors, so they understand what you are talking about.
You are dealing with professionals, people who know the same playing field as you, and who we can communicate with on a high level and get a lot done. Number two is with appeals, you are dealing with a very high volume of cases because appeals is trying to screen cases out prior to litigation. Trying to resolve disputes has a lot more flexibility.
For example, if you are taking an audit into appeals, appeals is not going to go through bank statements or receipts. Appeals will take a look at the presentation of information and they will make an objective decision independently of the auditor.
The appeals process works like an informal mediation. Neither the collections agent nor the collections manager is present. It is just you and the appeals officer. You state your case. The government's case has been stated through the audit report or through the collections report and appeals tries to negotiate a resolution. By and large, we have had really positive experience within IRS appeals.
We recommend the appeals process. We think it is a great process, but obviously it depends on what the issue is. You are certainly going to want an attorney to guide you through that process because the implications are if the process breaks down, presumably the IRS is going to litigate or you are going to take your shot in appeals and that is it. You want to involve an attorney in the appeals process. You want to negotiate with appeals, and then you can go from there.
CDPS/CAPS – Collection Appeal Rights
Taxpayers can appeal most collection actions. The main options for appealing collection actions include: Collection Due Process (CDP) and Collection Appeals Program (CAP).
A Collection Due Process (CDP) is a type of hearing available to taxpayers if they have received a notice from the IRS outlining their federal tax liability. Taxpayers can request a Collection Due Process hearing if they have received any of the following notices:
- Notice of Federal Tax Lien Filing and Your Right to a Hearing
- Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing
- Notice of Jeopardy Levy and Right of Appeal
- Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing
- Notice of Levy and Your Right to a Hearing
Taxpayers who need to request a hearing must complete Form 12153, Request for a Collection Due Process or Equivalent Hearing. Taxpayers have 30 days from the date of the notice to request a Collection Due Process hearing.
An appeals process is available to taxpayers who disagree with an IRS decision concerning their federal tax liability. The Collection Appeals Program (CAP) is a type of hearing where taxpayers can challenge a decision made against them. Essentially, the program is available to taxpayers who disagree with the Collection Due Process hearing determination.
“Under the Collections Appeals Program, if you disagree with an IRS employee’s decision and want to appeal it, you can ask their manager to review your case. If you then disagree with the manager’s decision, you may continue with the Collection Appeals Program as outlined in Publication 1660” (Taxpayers may pursue the Collection Appeals Program under three major options:
- Before or after the Notice of Federal Tax Lien
- Before or after seizure of property
- After rejection, termination, or proposal to terminate an Installment Agreement
More information about both the Collection Due Process and the Collection Appeals Program can be obtained by reviewing Publication 1660, Collection Appeal Rights.
Having your installment agreement request rejected by the IRS can be devastating. It was a lot of work to apply and now what? Do not give up hope. The IRS has an appeals process where you can challenge their decision. Fortunately, the appeals process is fairly straightforward and you have an opportunity to sit down and have a face-to-face conversation with the appeals agent. Or, you can have me or another representative negotiate your appeal on your behalf. Whichever way you want to go, I encourage you to call me. I can describe how I have handled the appeals process for some of my other clients and you can decide which route you want to take.