When an IRS Payment Plan Request Becomes Pending, and Why That Moment Matters

Most of the protections that come with a payment plan attach before the plan is approved. The levy bar in IRC 6331(k)(2)(A) applies while a request is pending. The right to an independent review before rejection applies to pending requests. The appeal rights that follow a rejection depend on there having been a pending request to reject.

So the question that matters in the first days is not whether the IRS will approve your plan. It is whether your request is pending. Here is how the IRS decides.

The legal definition

Treas. Reg. 301.6159-1(b)(2) says a proposed installment agreement becomes pending when it is accepted for processing. It remains pending until the IRS accepts the proposal, notifies you it has been rejected, or you withdraw it. The regulation adds that the IRS may not accept a proposal for processing after a case involving the liability has been referred to the Department of Justice.

If a pending request lacks information the IRS needs to evaluate it, the regulation says the IRS will ask for the information, and if you do not provide it within a reasonable time, the IRS may reject the proposal. Note the word reject. A pending request that goes stale is rejected, not ignored, which brings independent review and appeal rights with it.

What makes a request pending

IRM 5.14.1.3 turns the regulation into a checklist, and Exhibit 5.14.1-5 repeats it. To identify a request as pending, the taxpayer must:

• Provide enough information to identify the taxpayer, generally a name and taxpayer identification number.
• Identify the tax liability to be covered.
• Propose a specific monthly or other periodic payment amount.
• Be in compliance with all filing requirements.
• Provide a completed collection information statement, when one is required.
• Not be in bankruptcy when requesting an agreement for post-petition liabilities, unless the request qualifies as a guaranteed agreement.
• For businesses that have pyramided payroll taxes, be in compliance with federal tax deposit requirements.

When the criteria are met, the IRM requires the employee to identify the account as pending on IDRS within 24 hours, using transaction code 971 with action code 043. That code is what stops the computers from issuing levies.

The details that trip people up

A specific number. The IRM is clear that a specific monthly payment amount must be specified for the account to be marked pending. If you do not offer one, the employee is told to ask how much you can pay per month and to explain that the request will not be pending until that information is received.

All returns filed. If returns are missing, IRM 5.14.1.3 says to advise the taxpayer that the request is not pending, and that a new proposal must be submitted after the returns are filed. This is the most common reason a request is not pending.

Estimated taxes and deposits are different. The IRM says requests meeting the criteria are identified as pending even if the taxpayer is not current with estimated tax payments or federal tax deposits. But no agreement can be approved until that payment compliance is achieved, so fix it while you are protected.

A financial statement only when required. For a Simple Payment Plan or guaranteed agreement, none is required, so none is needed for pending status. When one is required, the IRM says it may be given verbally or in writing, and is considered complete when it contains enough information for an initial collection decision. A request stays pending even if the IRS later asks for documents to verify the statement or asks you to address equity in assets.

Immediate approvals and cases from the campus

Not every request goes through a pending stage. When an agreement can be approved on the spot, such as a Simple Payment Plan granted on the phone or online, IRM 5.14.1.3 tells employees not to input the pending code at all; the account goes straight to installment agreement status, and the levy bar for agreements in effect applies from that moment.

When a case comes to a revenue officer from the campus or the Automated Collection System with a pending code already on it, IRM 5.14.1.3.1 tells the revenue officer to contact the taxpayer and confirm a request was made. If the taxpayer requested an agreement but is not current on filing, the revenue officer does not reverse the code immediately; instead the taxpayer gets a deadline to file, and is told the pending status will be reversed without independent review if the deadline is missed. Treat that deadline as the most important date on your calendar.

One more procedural note: if you ask for a plan by email, IRM 5.14.1.3 says the IRS will not answer by email. It will contact you by phone or letter. Make your request by phone, online, by Form 9465, or through your revenue officer.

Examples from the Manual

• Pending: a taxpayer calls, gives a name and Social Security number, identifies the balances, is current on filing, offers $500 a month, and provides a financial statement sufficient for an initial decision. Even though the revenue officer needs bank statements and wants an asset liquidated first, the request is pending.
• Not pending: the revenue officer analyzes a financial statement and tells the taxpayer $1,500 a month would be appropriate. The taxpayer never responds.
• Not pending: a taxpayer tells an employer to send $500 a month to the IRS but never communicates with the IRS.
• Not pending: a taxpayer proposes $500 a month on a partial payment request but cannot provide complete income, expense and asset information. Without enough for an initial decision, there is no pending request.

Requests that are never pending

• Requests made solely to delay collection. See requests the IRS treats as made to delay.
• Requests from taxpayers already pursuing another resolution, such as currently not collectible status or an offer in compromise. The IRM cites Treas. Reg. 301.6159-1(b)(2) for the point that a request is not pending until accepted for processing.
• Requests covering liabilities in a pending or accepted offer in compromise.
• Requests for agreements on post-petition liabilities while the taxpayer is in bankruptcy, unless the request meets guaranteed agreement criteria.

What pending status does for you

• No levy on the covered periods, under IRC 6331(k)(2)(A). See how a payment plan stops levies.
• No enforcement warnings. IRM 5.14.1.4 says employees should not warn of enforcement action while a request is pending, and that issuing Letter 1058 is prohibited during that time.
• Independent review before rejection. IRC 7122(e)(1) requires it, and IRM 5.14.9.2 says only requests meeting all pending criteria are required to have that review. See rejection and independent review.
• Appeal rights after rejection.

Pending status also suspends the collection statute while the request is under consideration, under Treas. Reg. 301.6159-1(g). That is the price of the protection, and it is usually worth paying.

Withdrawing a pending request

You can withdraw a pending request, usually because another resolution fits better. IRM 5.14.4.5 says withdrawals can be verbal or written and are documented on Form 14425. A written withdrawal is effective when received; a verbal one is effective five calendar days after it is made unless written confirmation arrives sooner. Withdrawing extinguishes your appeal rights on that request, but the IRM notes you can propose a new agreement at any time. On a joint request, both spouses must agree to withdraw.

Make sure yours counts

Before you call or file: every return filed, the periods you owe identified, a specific monthly number that clears the balance before the collection statute runs, and a financial statement ready if your plan needs one. Test the number with the payment plan calculator. Then ask the employee directly whether the request is being marked pending, and write down the date, the name and the ID number. That one question is worth more than any other you will ask on the call.