The IRS typically rejects an installment agreement for one of three reasons. For example, 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, 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 collection 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 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).
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 that 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 that 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 that 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” (IRS.gov, “Publication 594, The IRS Collection Process,” 8/21/2013). 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.