An installment agreement with the IRS can make back taxes more manageable. But what happens if your request is denied?
Finding out that the IRS denied your request for a payment plan can feel discouraging.
But a denial doesn’t mean you’re out of options.
In fact, several different strategies can help you move forward and resolve your tax debt.
Why the IRS May Deny an Installment Agreement
The IRS rejects installment agreements for a few common reasons:
- Unfiled tax returns. You must be current on all filings before the IRS approves a plan.
- Payment too low. If the amount you offered doesn’t meet what the IRS calculates you can afford, they may deny the request.
- Incomplete or inaccurate information. Missing documents or financial details can lead to rejection.
- History of default. If you’ve broken previous agreements, the IRS may be less willing to grant a new one.
Steps to Take After Denial
Step One: Appeal the Denial
The first step is to review the IRS notice carefully. It should explain why your request was turned down. Once you know the reason, you can correct the issue and reapply.
For example, if unfiled returns are the problem, filing them immediately can put you back on track. If affordability is the issue, you may need to propose a higher payment.
If you believe the IRS made a mistake, you have the right to appeal within 30 days of the denial notice. The appeal goes through the IRS Independent Office of Appeals under the Collection Appeal Program.
Appeals can be especially useful if:
- You provided complete information, but the IRS miscalculated.
- You believe the payment you offered is realistic based on your income and expenses.
Step Two: Revise and Reapply
Sometimes the simplest fix is to adjust your proposal:
- Offer a slightly higher monthly payment.
- Provide missing or updated financial documentation.
- Make sure all required returns are filed.
The IRS may approve a revised installment agreement if it aligns more closely with their expectations.
Step Three: Explore Alternative Programs
If reapplying is not possible, there are several other ways to address your debt:
- Offer in Compromise (OIC). Allows you to settle your debt for less than the full balance if you qualify.
- Currently Not Collectible (CNC). This stops collection if you can prove paying would cause hardship.
- Partial Payment Installment Agreement (PPIA). Lets you make smaller monthly payments that do not pay the full balance. Once the collection period ends, the IRS forgives the remaining amount.
- Appeal. If you believe the IRS denied your plan unfairly, you can request an appeal with the Independent Office of Appeals.
Step Four: Prevent Future Problems
Even if your payment plan is denied, you can still get back on track by:
- Filing all returns on time.
- Staying current on this year’s tax obligations.
- Providing accurate, complete financial information in your application.
The IRS is more likely to approve a plan when you demonstrate compliance.
Reassurance: Denial Is Not the End
Competitors like Anthem highlight that a denial isn’t final — and they’re right.
At Tax CPA 911, we go further by walking you through each option, step by step.
The key takeaway: there’s always a path forward, whether that’s appealing, revising, or pursuing a different form of relief.
Connecting the Series
This blog follows our last article about what a tax settlement is and how it works. That post explained how taxpayers can resolve debt through compromise programs. Here, we focus on what to do when a basic installment agreement is denied.
Next, we’ll cover what happens if you default on an IRS payment plan. Even approved agreements can fall apart, and knowing the consequences helps you avoid bigger problems.
Final Thoughts
An IRS denial of your payment plan doesn’t mean your options are gone.
Whether you appeal, adjust your offer, or look at alternatives like an OIC or CNC, solutions are available.
Acting quickly within deadlines and providing complete documentation are the keys to moving forward.