The Internal Revenue Service offers a variety of options to taxpayers who can’t immediately pay their taxes in full. A partial payment installment agreement (PPIA) is one of these options. Requesting a PPIA with the IRS is easier
and less time-consuming than requesting an offer in compromise, but it still requires attention to detail and you have to know the rules and requirements.
A PPIA is a payment plan with the IRS that allows you to pay off a portion of your taxes owed in monthly payments until the tax liability expires. The IRS only has 10 years to collect on a tax balance from the time the tax return is filed. After that, the balance is forgiven.
Like an offer in compromise, a PPIA has the potential for large tax savings. The PPIA works by making monthly payments to the IRS until the tax balance expires. The monthly payment varies for taxpayers and depends on how much you owe and how much disposable income you have each month.
Eligibility
A PPIA is a very appealing resolution to taxpayers as you can save thousands of dollars. But unfortunately, it is a very difficult resolution for people to qualify for. To be eligible, you must have all required tax returns filed and must have made any required estimated tax payments. If you haven’t, the IRS will not negotiate a resolution with you. If you’re not eligible now, we can help you to become eligible.
To be eligible, you cannot have an active offer in compromise. You also cannot file for bankruptcy. If you have equity in any assets, like you own your home, a car or profitable land, the IRS may not grant you a PPIA as they may ask you to borrow against that asset and pay your tax liability that way. The IRS will look at the following circumstances when considering if you qualify for a PPIA and what you’re your monthly payment should be:
- Taxpayer’s ability to pay
- Taxpayer’s current income
- All expenses a taxpayer is currently paying
- The taxpayer’s assets and equity.
When trying to get a PPIA approved, the IRS may ask for substantiation for expenses you are claiming or ask for recent bank statements. They will inquire into almost all aspects of your finances. They are trying to see if you have more money than you say you do. You or your tax resolution specialist can argue for certain expenses and try to keep the monthly payment amount low. We’re experts at negotiating with the IRS.
Benefit: The repayment period for a PPIA can be longer than other IRS installment agreement options.
PPIA Process
When applying for a PPIA, a Collection Information Statement is required. This will gather and present all of your financial information so the IRS can look at your current finances and see what you can afford.
You will then also fill out a Form 9465 Installment Agreement Request. You will want to estimate what you think you could afford to pay each month. Make sure you can afford the payment, because if you default on the payment agreement, you may have to start the whole process over.
These files will be sent to the IRS along with your most recent tax return. If you are working with a tax professional, you can have them contact the IRS on your behalf to request the PPIA. The IRS will then contact you or your tax professional and let you know if they are requiring more information. If they require more information, they will let you know what they need and give you a deadline. Missing a deadline may cause the IRS specialist to reject your offer.
After getting the IRS the information requested, you may need to defend your stance and it may take time before a decision is made.
The IRS can review your PPIA every two years. They are looking to see if your financial situation has improved and that you could afford a higher payment. If your financial situation has indeed improved, they may try to raise your monthly payment. You or your tax professional can try to fight this, but it may require providing proof you cannot afford the higher monthly payment.
Although you won’t have any levies or garnishments put against you when your PPIA is approved, liens can be filed against you and your property.
A PPIA might be the best resolution for a taxpayer to pay a tax liability, and maybe have a portion of the debt forgiven.
The PPIA sounds complicated, frankly, it is! It requires experts like us to get them accepted.
If you retain us for tax relief, our first goal is to get you protected under a Power of Attorney (IRS FORM 2848). Once a 2848 is enforced, you no longer have to talk to the IRS. Meaning IRS Tax Freedom will do all the IRS legwork for you, as well as negotiating with the IRS.
We can handle all the paperwork and forms that need to be submitted, follow up with the IRS, and fight for your best agreement.
But it’s important upfront to know whether a partial pay installment agreement is the right path in the first place.
Your next step is to schedule a conversation with us to find out what the IRS has on you, and what the lay of the land is regarding the best path forward.
Schedule your Free Discovery now.