Appealing a Rejected or Terminated Payment Plan Through the Collection Appeals Program

When the IRS rejects a payment plan request, proposes to terminate a plan, terminates one, or modifies one, you can ask the IRS Independent Office of Appeals to look at it. The usual route is the Collection Appeals Program, known as CAP. It is quick, it is informal, and its decisions are binding. It is also limited in ways you should understand before you choose it.

What you can appeal and when

IRM 8.24.1.3.4 sets out the timeframes for installment agreement appeals in a table:

• Rejected agreement: 30 days to request an appeal, timely postmarked. The authority is IRC 7122(e), and IRC 6331(k)(2)(B) bars levy for 30 days after rejection and while a timely appeal is pending.
• Modified or proposed modification: 30 days from the proposed modification, or before the end of the 30-day period beginning the day after the modification takes effect. If you appeal before the modification, you may not appeal again once it takes place. The authority is Treas. Reg. 301.6159-1(e)(5).
• Proposed termination, meaning a default notice such as CP 523 or Letter 2975: 30 days from the notice. Unless you appeal within that period or cure the default, the IRM says the agreement terminates by law.
• Terminated agreement: 30 days after the termination takes effect. If you already appealed the proposed termination, you may not appeal again after it takes effect. The authority is IRC 6159(e) and the regulation.

IRM 5.14.9.3 adds two practical points. The 30-day timeframes for these appeals cannot be extended. And the IRS allows at least 15 additional days in case a request is mailed on the 30th day, before taking action, unless you confirm no hearing was requested.

How to file

IRM 8.24.1 says Form 9423, Collection Appeal Request, is recommended for CAP appeals, but any written request for a CAP hearing will be honored. The current revision of Form 9423 is dated February 2020. For campus cases, CP 523 itself describes how to appeal; IRM 5.19.1.6.4.19 notes the taxpayer may complete Form 9423 or its equivalent.

For many collection actions, CAP expects you to talk to a collection manager first. Installment agreement appeals are different. IRM 8.24.1 states that a conference with the group manager is not required on installment agreement CAP appeals. You can go straight to the appeal, though a call to the manager can still resolve some disputes faster.

Keep the appeal focused. State what action you are appealing, the date of the notice, why you disagree, and what you propose instead. Attach the financial information or documents that support your position. A good appeal reads like a better version of the request that was rejected.

Then follow it. On a field case, IRM 5.14.9.2.3 tells the revenue officer to record the date Form 9423 was issued to you, the date your completed form was received, and the date the file was forwarded to Appeals. IRM 5.14.2.3.1 adds that a case is not considered transferred to Appeals until confirmation of the transfer is received and documented. A week or two after you file, call and ask for the date your appeal was forwarded. If no one can give you one, put the question in writing.

What happens to collection

A timely appeal keeps the levy bar in place. IRC 6331(k)(2)(B) and (D) bar levy during a timely appeal of a rejection or termination, and IRM 5.14.11.7 says no levy action may be taken on the periods in the agreement while you may appeal a default or termination. The pending code stays on your account during an appeal of a rejection, according to IRM 5.14.1.3.

The collection statute is suspended during the appeal. Treas. Reg. 301.6159-1(g) suspends it while a rejection or termination is being considered by Appeals. That is the usual trade for protection.

If Appeals sustains the rejection, the IRS removes the pending code after a further 30 days, as IRM 5.14.1.3 describes, and collection can then resume. If Appeals grants an agreement, it is processed like any approved agreement. IRM 5.14.2.2.5 adds that managers must approve partial payment agreements that Appeals has decided to grant.

The limits of CAP

• No Tax Court review. IRM 8.24.1 states the taxpayer has the right to petition the Tax Court about Appeals' determinations under collection due process, but not under CAP.
• Binding on both sides. IRM 8.24.1 says decisions by Appeals are binding on the taxpayer and the Collection function, with limited exceptions. Collection carries out what Appeals directs, but if you default on the resulting agreement, Collection is released from its terms.
• One bite. You cannot appeal the same issue on the same facts again once Appeals has decided it. And as noted above, appealing a proposed termination uses up the right to appeal the termination itself.

CAP or collection due process?

Sometimes you have a choice. If you received a notice of your right to a collection due process hearing, such as a final notice of intent to levy or a notice of a filed lien, you can propose an installment agreement in that hearing. IRC 6330(c)(2)(A)(iii) lists offers of collection alternatives, including an installment agreement, among the issues you may raise. A CDP determination can be reviewed by the Tax Court; a CAP decision cannot.

IRM 8.24.1 addresses taxpayers who request both: they must choose one. If you choose CAP, the hearing officer is to explain what rights you are giving up by withdrawing the CDP request, including judicial review, and if you will not sign a withdrawal or cannot decide, you should be given the CDP hearing. CDP deadlines and procedures are their own subject; the earlier guide on requesting a CDP hearing covers the basics.

For a straightforward dispute about whether a plan should be accepted, reinstated or left alone, CAP is usually faster. For a case where the stakes justify court review, or where you want to raise other issues alongside the plan, CDP may be worth the extra time.

Building the appeal file

• The notice or letter you are appealing, with its date.
• Your original proposal and every document you sent with it.
• A short statement of each point of disagreement, tied to the reason the IRS gave.
• Updated financial information if your ability to pay is the issue, organized the way the IRS reads it: income, allowable expenses under the Collection Financial Standards, and assets.
• Proof of compliance: every return filed, and current estimated payments or deposits.
• Your proposed resolution: a specific payment amount and due date, or a request to reinstate on stated terms.

Two other things worth knowing

Appeals takes these cases even when the collection clock is short. IRM 5.14.2.3.1 says timely appeals of installment agreement rejections, terminations and proposed terminations must be referred to Appeals regardless of the time remaining on the collection statute, and the referring function must flag any statute that expires within 120 days.

And Appeals is not the only door. If the dispute is causing an economic burden or the IRS is not responding, the Taxpayer Advocate Service accepts cases on Form 911, and IRM 5.14.9.4 directs employees to refer taxpayers to TAS when the case meets TAS criteria or cannot be resolved the same day.

Before you appeal, read the letter again

A rejection letter tells you what action would make the agreement acceptable and gives you a date; see rejection and independent review. A default notice tells you the reason for default and the corrective action. Sometimes the fastest resolution is simply to do what the letter asks. If you can cure a default, the IRS must reinstate the agreement; see what a CP 523 default notice means.

Appeal when you disagree with the IRS's facts or judgment: the payment it says you can afford, the equity it says you have, the default it says you caused. Then appeal on time, in writing, with the documents. Thirty days is the whole window, and it does not stretch.