IRS Letter 484C: Why Did The IRS Reject My Installment Agreement?

Logan Allec, CPA

Founder of Choice Tax Relief · Over 140,000 YouTube subscribers covering IRS and state tax relief, unfiled tax returns strategies, and general tax strategy.

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IRS Letter 484C is a letter that the IRS sends to a taxpayer to let them know their Installment Agreement request couldn’t be processed.

Since the original proposed amount isn’t enough to make an Installment Agreement feasible, the IRS counters the taxpayer’s offer with one of its own.

Here is a redacted Letter 484C that the IRS sent to one of our clients.

IRS Letter 484C At a Glance

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IRS Letter 484C Explained, Part by Part

Here is a full explanation of the Letter 484C, part by part.

Part 1: The IRS’s Proposed Installment Agreement

First, the IRS will open the letter by letting you know that they couldn’t process your request for an installment agreement. However, they have provided you with an alternative amount that they could process.

If you choose to take their option, then complete and return the revised payment proposal on the Form 433-D Installment Agreement.

Part 2: If You Cannot Pay the IRS’s Proposed Amount

Next, the IRS will provide you with some options if you cannot pay their proposed amount. Mainly, it revolves around submitting a request for a partial payment installment plan.

You will need to complete and submit a Form 433-F or Form 433-B if you’re a business. This form should be submitted with your Form 433-D Installment Agreement request.

If you don’t submit this within 30 days of the letter, your request may be completely rejected, and you will have to file an appeal with the Office of Appeals.

Part 3: Penalties 

Then, the IRS will tell you about the penalties you may incur.

Failure-to-File or Failure-to-Pay Penalties are assessed on a monthly basis. There is a 5% monthly fee for filing your return late and a 0.5% fee for not paying your tax by the due date. The fees are charged on a monthly basis. However, neither penalty can be more than 25% in total.

If a Notice of Intent to Levy is issued and you don’t pay the balance due within 10 days of the notice, the penalty will increase to 1% per month.

For individuals who filed on time, the Failure-to-Pay penalty decreases to 0.25% as long as the taxpayer is partaking in an approved Installment Agreement.

Part 4: Interest

Then, the IRS will provide you with your interest charges.

They are required by law to charge interest if you leave your liability unpaid. It will break down how they calculate it and advise you to make a payment to reduce the total sum the IRS uses to calculate your interest.

Part 5: Federal Tax Payments

Next, the IRS will provide you with three ways to make Federal tax payments.

The first is federal tax withholdings. If you are an employee, your employer will withhold some of your income and pay it to the United States Treasury in your name. If they are withholding too little, you can give them a new Form W-4 to change the amount they’re withholding for you.

The second is estimated tax payments. Self-employed people generally pay their tax this way. For more questions, review the Form 1040-ES.

The third option is a federal tax deposit. If you are an employer, you must withhold federal income tax, social security tax, and the employer portion of social security and Medicare to pay the FUTA tax.

Part 6: Additional Information

Then, the IRS will provide you with resources for additional information.

They provide both an international and a national number, as well as a website with more tax forms.

Part 7: For Further Contact

If the provided additional information doesn’t suit your needs, the IRS also provides you with a form to write to them.

You will need to provide a copy of the letter and fill in your phone number and available hours.

Part 8: Payment By Mail

Lastly, if you choose to pay the IRS via mail, you must return a copy of this page with your payment. Your check or money order should be made payable to the United States Treasury.

Don’t forget to include your name, address, TIN, tax year, tax form, and daytime telephone number.

What You Should Do If You Receive IRS Letter 484C

Below are steps for you to take after you receive a CP161 Notice from the IRS.

Step 1: Agree With The New IRS Balance and Begin Making Payments

If you can afford the new IRS Installment Agreement terms, then complete and submit the Form 433-D with your new proposal.

You should submit this as soon as possible and begin making payments on your new balance. Remember, the longer you wait, the more interest and penalties accumulate on your account. In order to best protect your balance, you need to deal with your IRS outstanding balance as soon as possible.

Once your Installment Agreement request is completed, go ahead and start making payments so you don’t default on your agreement.

Step 2: Apply For A Partial Installment Agreement

If you cannot pay the full amount, then you should apply for a partial installment agreement.

If you are a single taxpayer, you will need to fill out and submit a Form 433-F. Alternatively, if you’re a business, you will need to fill out a Form 433-B. This form should be submitted with your Form 433-D Installment Agreement request.

These forms will allow you to tackle your IRS debt without putting you in immediate financial danger.

Again, you’ll want to submit this as soon as possible since you only have 30 days from the date of the notice to respond.

Where to Go From Here

If the IRS could not process the installment agreement you proposed, the fastest path forward is usually a revised installment agreement at an amount the IRS will accept.

When even the revised figure is out of reach, you may qualify for currently not collectible status, which pauses IRS collection while your finances recover.

Taxpayers whose balance is far beyond what they could realistically repay should look at an offer in compromise instead.

It is also worth requesting penalty abatement, because penalties are often a meaningful share of the balance the IRS is asking you to pay.

Choosing among those options is a strategic call rather than a clerical one, and we can map it out for your situation on a free consultation.

Author:

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Logan Allec, CPA, Founder and Owner

Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.

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