Your Application for Tax Debt Relief Was Denied: Now What?

Your Application for Tax Debt Relief Was Denied: Now What?

• Jun 01, 2024

Dealing with tax debt can be a stressful experience, and having your application for tax debt relief denied by the IRS can feel like a major setback. However, a denial isn't the end of the road. There are several steps you can take to improve your chances of success on a subsequent application. This guide will provide detailed steps on what to do next, how to reapply for tax relief, and when to consider seeking professional help.

Understanding the Reasons for Denial

Before you take any further steps, it's crucial to understand why your application was denied. The IRS typically provides a detailed explanation for the denial in their notice. Common reasons for denial include:

1. Incomplete or inaccurate application information
2. Failure to provide necessary documentation
3. Ineligibility for the specific type of relief requested
4. Insufficient evidence of financial hardship

Review the denial notice carefully and take notes on the specific issues identified by the IRS. This will help you address these problems in your reapplication.

Correcting Application Errors

One of the most common reasons for denial is errors or omissions in the application. Carefully review your initial submission and the IRS’s feedback. Common mistakes include:

• Missing forms or documents
• Incorrect financial information
• Incomplete personal details

Double-check your financial statements, tax returns, and other required documents for accuracy. Ensure that all necessary forms are filled out completely and correctly.

Gathering Supporting Documentation

To strengthen your reapplication, gather comprehensive supporting documentation. This may include:

• Recent pay stubs or income statements
• Bank statements
• Detailed expense reports
• Medical bills or other evidence of financial hardship

Providing a thorough and accurate picture of your financial situation can help demonstrate your need for relief.

Exploring Different Types of Tax Relief

If your initial request was for a specific type of relief, such as an Offer in Compromise (OIC), consider whether another type might be more appropriate for your situation. The IRS offers several tax relief options, including:

1. Installment Agreements: Allows you to pay off your debt over time in manageable monthly payments.
2. Currently Not Collectible (CNC) Status: Temporarily suspends collection activities if you cannot pay due to financial hardship.
3. Offer in Compromise (OIC): Settles your tax debt for less than the full amount you owe if you can prove that paying the full amount would cause financial hardship.

Evaluate your eligibility for these options and consider whether a different form of relief might be more likely to succeed.

Reapplying for Tax Relief

Once you’ve addressed the reasons for your initial denial, corrected any errors, and gathered the necessary documentation, you can prepare to reapply. Follow these steps:

1. Review IRS Guidelines: Carefully review the IRS guidelines for the specific type of relief you are seeking. Ensure that you meet all eligibility criteria and have all required documents.
2. Complete the Application Forms: Fill out the appropriate IRS forms for your chosen relief option. Be meticulous in ensuring that all information is accurate and complete. Forms may include:

• Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals)
• Form 656 (Offer in Compromise)
• Form 9465 (Installment Agreement Request)

3. Write a Cover Letter: Include a cover letter with your reapplication that addresses the reasons for your initial denial and explains how you have rectified these issues. Be clear and concise, and reference any additional documentation you are providing.
4. Submit Your Application: Send your completed application, along with all supporting documents and your cover letter, to the appropriate IRS address. Ensure that you keep copies of everything you submit for your records.

Preparing for an Appeal

If your reapplication is denied, you still have options. You can appeal the decision within 30 days of receiving the denial notice. The appeal process involves:

1. Submitting a Formal Appeal: Complete Form 9423 (Collection Appeal Request) to formally request an appeal. Include a detailed explanation of why you believe the denial was incorrect and provide any additional supporting documentation.
2. Attending a Hearing: The IRS will schedule a hearing where you can present your case. Be prepared to explain your financial situation and why you qualify for relief. Having a tax professional represent you can be beneficial during this stage.
3. Awaiting the Decision: After the hearing, the IRS will review your case and make a decision. If the appeal is successful, they will grant the requested relief. If not, they will provide further instructions and potential next steps.

Seeking Professional Help

Reapplying for tax relief can be a complex and time-consuming process. If you’re unsure about any aspect of your application or feel overwhelmed, consider seeking professional help. Our tax experts specialize in finding the right tax relief plan for you, and will be your advocate with the IRS to help negotiate a repayment plan that works with your finances. Contact us at the IRS Advocates today for a free consultation.