4 Reasons Why the IRS Might Deny a Payment Plan
If you’ve been following our advice, then you know that one of the top services that Success Tax Relief offers is affordable installment payment plans with the Internal Revenue Service (IRS). We take pride in these plans and how many customers we helped. In addition, if the IRS is giving you trouble, we will do your best to mediate and find a viable solution.
Why The IRS Does Payment Plans
At the fundamental level, the IRS sees payment plans as profitable. They want taxes in a reasonable amount of time, and a payment plan allows them to see staggered installments. The working theory is that the individual who owes taxes want to be honorable and honest, and an affordable amount means they will honor the debt. Thus, both parties will be happy.
Now 99% of the time, we’ve been successful in helping taxpayers pay a reasonable monthly amount to the IRS without breaking their bank. However, there is that 1% where other solutions will need to be sought out because the IRS has denied a payment plan for one of our clients. They realize that the deal doesn’t benefit them, and they’d rather have the full amount on time.
Reasons For Denying An IRS Payment Plan
Bear in mind that we communicate with the IRS on our clients’ behalf. We arrange for all of the necessary documents to be presented to the IRS so that they can review your case.
Even so, the IRS auditors are the ones who make the final decision. We are your mediators, messengers, and negotiators. But we cannot guarantee that an auditor decides to make a different decision.
You can call the IRS to plead your case or fill out Form 9423 for an appeal. Even so, it may not be enough. The auditors are the decision makers. They can still reject you.
The IRS rules also constantly change. We can keep up with the updates, but sometimes we get goalposts moved for our clients. All we can do is explain the possibilities that you cannot receive a payment plan, and we have to look into alternative solutions.
It is essentially up to the IRS to determine the terms of your tax case. Technically, they have a financial incentive to audit you. They also have the right to deny a payment plan based on certain provisions and rules. Here are several possible reasons why:
1. You Defaulted On A Previous Payment Plan With The IRS.
The IRS does not like it when people renege on taxes. Farmers and restaurant owners may try to slip under the radar, but it’s a bad idea to do this either accidentally or deliberately.
IRS auditors take note of missed payments or unfiled returns. They then prepare potential punitive steps. Even if you hear nothing after one year, the auditors keep records. They could deliver bad news at any time.
The first step would be fines and financial penalties. In the worst-case scenario, they would take away your house or even send you to prison. This applies to payment plans as well as regular tax returns. If you haven’t paid your taxes in several years, you may be denied a payment plan.
If the IRS has already trusted you to pay off a debt that you defaulted on, then chances are they won’t go into another agreement with you. From the IRS’ perspective, you have bad credit with them. This is a challenging thing to overlook with the assistance of any tax relief service.
2. You’re In The Process Of Paying On A Tax Debt From A Previous Year.
This is referred to as the pyramid effect. In contrast to defaulting on a previous payment to the IRS, you might still be in the middle of paying on a tax debt from a previous year and therefore may be financially unable to take care of the current year. While this may be one of the reasons the IRS may deny you of another payment plan, there are still some solutions for you because you are in good faith with them.
This is where Success Tax Relief can come in and assist you with other alternatives like appealing your denial and helping you modify your current installment agreement and other solutions that you might qualify for with the IRS. That is why we negotiate and try to help you find a Plan B, C, or D.
3. The Plan Doesn’t Pay Off The Debt Before The End Date.
When negotiating with the IRS, the end result is for the IRS to get their money. If the terms of the negotiation aren’t in their favor, you could very well be denied of a payment plan. It’s pretty straightforward, if blunt.
Usually, in an IRS installment plan, there’s a deadline. So, within that deadline, a certain amount of money needs to be paid to them every month. If the amount of money you owe to the IRS is substantial, then chances are your monthly payment may be too. If the monthly amount you can afford to pay doesn’t pay off the total debt, you could be denied.
4. Your Living Expenses Are Too Excessive.
Another reason for getting an installment plan denied is that your living expenses are too luxurious. The IRS will review your annual income and expenses. They will see if deductions make sense. After deductions, they will also question if you had enough money to pay for needs such as food, housing, and work-related affairs.
In other words, you’ll be audited, and have to provide receipts, proof that you have spent exactly what you claimed. If the IRS believes that you’re excessively spending money on expenses that could be put toward your tax debt, then you can be denied.
Want To Know More?
Taxes and the IRS can be difficult to navigate. At Success Tax Relief, we want to help you understand the complicated rules, terms, and paperwork. After all, paying taxes is one certainty we always have in life.
Schedule a FREE CONSULTATION with one of our tax relief professionals today online.