Appeal an IRS Installment Agreement

Taxpayer Rights To Appeal An IRS Installment Agreement

If you request an Installment Agreement and the IRS rejects it, you have the right to appeal. Furthermore, as long as you appeal within 30 days, the IRS cannot levy your property or garnish your wages. The IRS cannot take any serious action until the appeal is complete.

If you are paying an Installment Agreement and the IRS terminates the agreement, you can also appeal. Fortunately, you have 76 days to appeal, but you should try to appeal within 30 days.

Key takeaways

• Appeal rights - You can appeal if the IRS rejects or terminates your installment agreement.
• Deadline - 30 days from the application rejection letter, or 76 days from the date the IRS terminates an existing payment plan.
• Process - Ask to speak to a manager. If they don't resolve the issue, file Form 9423 to request a hearing.

How to Appeal a Rejected IRS Installment Agreement

If the IRS rejects your Installment Agreement, a Revenue Officer may contact you directly. In other cases, you may receive a letter or phone call that is not from a Revenue Officer. Here’s how to appeal in both situations.

If the IRS notified you but a Revenue Officer is not involved, here’s what to do:

1. Call the IRS using the phone number in your letter.
2. Tell the IRS why your Installment Agreement should be accepted.
3. If the agent refuses your request, ask to speak with a Revenue Officer or a manager.
4. If they are not willing to work with you, say you would like to appeal.
5. Move to step 3 below.

If an IRS Revenue Officer notified you of your rejection, here’s how to appeal:

1. Call the phone number on your notice and explain why you want to appeal the decision.
2. If the Revenue Officer still refuses to accept your Installment Agreement, ask to speak to their manager.
3. If you have no success with the Revenue Officer’s manager, ask to speak to a Collections Manager.
4. Explain your case to the Collections Manager.
5. Fill out Form Form 9423 (Collection Appeal Request).
6. Attach a written explanation of your appeal with Form 9423.
7. Send in Form 9423, postmarked at least 30 days after the date on the rejection letter.
8. Wait for the decision.

The decision on your appeal is binding. If the Office of Appeals rejects your appeal, you cannot appeal again. It is always a good idea to work with a licensed tax professional who has experience appealing installment agreements.

Common Reasons for the Rejection of an IRS Installment Agreement

The most common reasons for Installment Agreement rejections:

1. 1. You didn’t complete Form 433 (Collection Information Statement)
   2. The IRS believes your living expenses are too high—for example, the IRS may reject a plan if you have kids in private school, really high car payments, or other “unnecessary” expenses.
   3. Form 433 was inaccurate or incomplete.
   4. You defaulted on installment agreements in the past.
   5. You have outstanding past tax returns.

How to Appeal the Termination of an Installment Agreement or Reinstate It

If the IRS plans to cancel your Installment Agreement, or your payment arrangement is in default, you will receive a termination warning notice in the mail. Usually, this is a CP 523 notice. The IRS notice notes that your agreement is in default, and it tells you the IRS can levy assets or file a tax lien.

You have 76 days to request an appeal. However, if you don’t appeal by the 30th day (after the notice was issued), the agreement will be terminated on the 46th day. Moreover, if you appeal after that point, the plan will be reinstated if your appeal is accepted.

Generally, you can only appeal a termination notice once in a 76-day period. It’s important not to let your agreement lapse twice in that short of a time period.

If an IRS Revenue Officer notified you of the termination, here’s how to appeal:

1. Call the IRS number on your notice and tell them why you want to appeal the termination. Make sure to call within 30 days at best or 76 days at worst.
2. If the IRS Revenue Officer refuses to reinstate your Installment Agreement, speak to their manager.
3. If you have no success with the Revenue Officer’s manager, ask to speak to a Collections Manager.
4. Talk to your Collections Manager and explain your case.

If your rejection letter came in writing, here’s how to appeal:

1. Complete Form 9423 (Collection Appeal Request).
2. Preferably attach a written letter of your request for appeal with Form 9423
3. Send in Form 9423, postmarked at least 30 days within the date on your CP 523 notice.
4. Do not send this form to the Independent Office of Appeals. Rather, send it to the address on the letter explaining your appeal rights.

Common Reasons for the Termination of an IRS Installment Agreement

An IRS Installment Agreement termination happens for a few reasons:

1. You missed a payment. The IRS waits 30 days before terminating your agreement if it is only your first or second missed tax payment
2. The IRS realized information on your Form 433 was incorrect or untruthful
3. You failed to file a current return.
4. You didn’t pay a current tax bill.

The process of appealing a denial or termination of an IRS Installment Agreement is not straightforward. As a result, many taxpayers choose to work with a licensed tax professional. Form 433 (Collection Information Statement) and Form 9423 (Collection Appeal Request) can be confusing.

What to Expect During the Appeals Process

The appeals hearing will likely take place over the phone. You do not have to go to a courtroom. Most appeals officers are experienced IRS pros who were formerly collection agents or auditors, so they have a deep understanding of the tax law and IRS processes, but more importantly, they're often flexible in an attempt to avoid litigation. 

During the hearing, you will get to explain your situation to the appeals officer. The revenue officer or collections agent will not be present. Instead, the appeals officer will get their side of the story through the collections report. If the appeals officer agrees with you, you will be able to keep your payment plan or set up an installment agreement. If they don't, you generally do not have any additional appeal rights, and you must look into alternatives.

Alternatives to Installment Agreements - What to Do If the IRS Rejects Your Appeal

If the IRS rejects your appeal, you will not be able to set up an installment agreement. The balance will be due in full, and if you don't pay, the IRS may initiate involuntary collection actions such as garnishing your wages, seizing your bank account, and taking your assets. However, you typically have 30 days after the appeals decision before the IRS can take any action. 

Talk with a tax professional about your options if you cannot pay in full. If you have limited income and assets, you may want to look into an offer in compromise or currently not collectible status.

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific advice regarding your tax situation, contact a licensed tax professional or tax attorney.