The Internal Revenue Service (IRS) payment plan system is designed to help individuals and businesses who owe taxes but are unable to pay in full at once. A payment plan allows taxpayers to pay their tax debt over time in smaller, more manageable amounts. This can help alleviate financial stress and prevent the accumulation of additional penalties and interest charges.
Setting up a payment plan with the IRS is an important step toward resolving tax debt and avoiding potential enforcement actions such as wage garnishment or bank levies. However, many taxpayers may wonder: Can the IRS deny a payment plan? In this blog post, we’ll explore the reasons why the IRS may deny a payment plan application, as well as options for appealing a denial and tips for avoiding a denial in the first place.
Reasons Why The IRS May Deny A Payment Plan
The IRS suggests taxpayers to apply for payment plans if they cannot pay their tax debt completely, but there exist various reasons why the agency might decline an application for such a plan. These include:
- Failure to disclose all relevant financial information: When applying for a payment plan, taxpayers are required to provide detailed financial information such as income, expenses, assets, and liabilities. If an individual does not include the full scope of necessary financial data or gives false information, the IRS may reject their proposal for a payment plan
- Failure to file tax returns or pay current taxes: Taxpayers who have not filed all required tax returns or have not paid their current taxes may be denied a payment plan. Before setting up a payment plan, taxpayers must be current on all tax obligations.
- Previous default on a payment plan agreement: The IRS may reject a taxpayer’s request for a new payment plan if they have previously failed to stick to a payment plan agreement.
- Unresolved tax disputes with the IRS: Taxpayers who have ongoing disputes with the IRS, such as an audit or tax court case, may be denied a payment plan until the dispute is resolved.
Before applying for a payment plan, taxpayers need to comprehend these reasons and make certain they fulfill all the requirements.
Options If Your Payment Plan Is Denied
If the IRS denies a payment plan application, taxpayers have several options for dealing with the denial:
- Requesting a reconsideration of your application: Taxpayers may request that the IRS reconsider their payment plan application by providing additional information or correcting errors on their initial application. This can be done by contacting the IRS directly or by working with a tax professional.
- Appealing the decision to the IRS Office of Appeals: Taxpayers who disagree with the IRS’s decision to deny their payment plan application may appeal the decision to the IRS Office of Appeals. This typically involves submitting a written request for an appeals conference and providing supporting documentation. Taxpayers may represent themselves or work with a tax professional during the appeals process.
- Seeking assistance from a tax professional or taxpayer advocacy group: Taxpayers who are struggling with a denied payment plan application may benefit from seeking assistance from a tax professional or taxpayer advocacy group. These professionals can provide guidance on the payment plan process, help identify and correct errors on an application, and assist with appealing a denied application.
It’s important for taxpayers to explore these options and take action as soon as possible if their payment plan application is denied.
Tips For Avoiding A Denied Payment Plan
To increase the likelihood of a successful payment plan application and avoid a denial, taxpayers should consider the following tips:
- Ensure all relevant financial information is disclosed accurately: When applying for a payment plan, it’s important to disclose all relevant financial information accurately and completely. This includes income, expenses, assets, and liabilities. Failing to disclose all relevant financial information can result in a denied payment plan application.
- File tax returns and pay current taxes on time: Before applying for a payment plan, taxpayers should ensure that they have filed all required tax returns and paid their current taxes on time. Failure to do so can result in a denied payment plan application.
- Communicate openly and honestly with the IRS: It’s important to communicate openly and honestly with the IRS throughout the payment plan process. If a taxpayer experiences a change in their financial situation or is having difficulty making payments, they should contact the IRS as soon as possible to discuss their options.
- Seek professional guidance or advice: Taxpayers who are unsure about how to apply for a payment plan or who are experiencing difficulty with the process may benefit from seeking guidance or advice from a tax relief professional or taxpayer advocacy group. These professionals can provide guidance on the payment plan process, help identify and correct errors on an application, and assist with appealing a denied application.
To improve their chances of setting up a payment plan with the IRS and avoid a denied application, taxpayers can follow these tips.
Conclusion
Setting up a payment plan with the IRS can be a helpful way for taxpayers to manage their tax debt. However, it’s important to understand the payment plan process and requirements to avoid a denied application. The IRS may deny a payment plan application due to failure to disclose all relevant financial information, failure to file tax returns or pay current taxes, previous default on a payment plan agreement, or unresolved tax disputes with the agency.
If a payment plan application is denied, taxpayers have options such as requesting reconsideration of their application, appealing the decision to the IRS Office of Appeals, or seeking assistance from a tax professional or taxpayer advocacy group. To avoid a denied payment plan application, taxpayers should ensure that all relevant financial information is disclosed accurately, file tax returns and pay current taxes on time, communicate openly and honestly with the IRS, and seek professional guidance or advice if needed.
By taking these steps, taxpayers can increase their chances of successfully setting up a payment plan with the IRS and avoid the potential consequences of a denied application. If you’re struggling with tax debt and need assistance with setting up a payment plan, don’t hesitate to seek out professional guidance and take action to resolve your tax obligations.
