The IRS offers installment agreements as a solution for taxpayers who aren't able to pay their tax debts in a lump sum. However, an installment agreement or payment plan isn't always approved by the IRS—especially for taxpayers who owe large amounts of tax debt. Our Los Angeles and Rancho Cucamonga tax attorneys explain what you can do if your IRS payment plan is denied.
What Does it Mean When the IRS Rejects Your Tax Return?
The IRS may reject a payment plan or an installment agreement for a variety of reasons. One of the most common reasons because a person provided false or incorrect information in their application. Underreporting income or making mathematical mistakes can result in a denial. Another common reason is presenting a bad deal. While installment agreements are meant to help taxpayers obtain debt relief, it is also meant to help the IRS collect debts. The IRS will also reject taxpayers' requests who are going through a bankruptcy case.
What Can I Do If the IRS Denies My Payment Plan?
If the IRS rejects your request, there are various things you can do to still obtain tax debt relief. You can continue to adjust and negotiate your request. You have 30 days from the date of rejection to file a Collection Appeal Request for reconsideration. However, if that is unsuccessful, you can pursue an alternative tax debt relief program. You can apply for an offer in compromise, which will help you create an agreement with the IRS to come up with an agreed-upon reduced amount.
Before applying for an offer in compromise, you must file all tax returns, make all required estimated tax payments for the current year, and make all necessary federal tax deposits for the current quarter if you are a business owner with employees. You won't be eligible for an offer in compromise if you are in an open bankruptcy proceeding.