In our previous blog post, Tax Resolution Services: Partial Payment Installment Agreement, we introduced the Partial Payment Installment Agreement and discussed one of its main advantages, which it shares with another popular tax resolution solution: Offer in Compromise. This advantage is the potential for a taxpayer to lower the total amount of money they owe to the IRS. As we mentioned towards the end of the post, there are several differences between these two tax resolution solutions. The most obvious of these differences is that Offer in Compromise is a lump sum payment, while the Partial Payment Installment Agreement is paid in installments over time. In this post, we’ll go into more detail about some of their other differences and requirements.
If you’re unfamiliar with Offer in Compromise or its requirements, you can check out our previous blog posts on the subject here: Tax Resolution Services: Offer in Compromise Requirements and Tax Resolution Services: Offer in Compromise.
If you’re just getting started on your tax resolution journey and you’re new to the series, we recommend you get started here: Tax Resolution: What is it?
Partial Payment Installment Agreement Requirements
In one of our previous posts, Tax Resolution Services: Offer in Compromise Requirements, we discuss the requirements for Offer in Compromise. Similar to Offer in Compromise, the PPIA also requires that a taxpayer is essentially experiencing financial hardship in order to make their payments. As we discuss on our main Partial Payment Installment Agreement page, the IRS must determine that you do not have enough assets worth liquidating to pay off your debt, that your wages would not cover you to pay off your debt in full without being able to cover your basic living expenses and that you do not have the earning potential to cover your debt in the coming years. To be eligible you must also be unable to cover the minimum payment requirement of a regular installment agreement.
In addition to this, the additional requirements of the PPIA that we discuss on our Partial Payment Installment Agreement page are that you:
- Are able to pay off some of your debt but not all of it by the statute of limitation
- Owe over $10,000 in tax debt
- Have not filed for bankruptcy
- Have no assets or your assets cannot cover the debt if liquidated
While some of these, like having not filed for bankruptcy, are similar to Offer in Compromise, OIC does not require that the taxpayer owes over $10,000 in tax debt to the IRS.
Partial Payment Installment Agreement – Statute of Limitations
As you can read on our Partial Payment Installment Agreement page, the statute of limitation is the amount of time from the date that the IRS has assessed a debt on your account until the amount of time that debt is required and your slate is wiped clean from the debt and the interest/ penalties that come with it. The statute of limitation for the IRS is 10 years from the date the debt was assessed.
Partial Payment Installment Agreement vs. Offer in Compromise
By taking a quick look at your total amount owed to the IRS, you may already be able to determine whether the Partial Payment Installment Agreement or Offer in Compromise may be the more appropriate tax resolution service for your current financial situation. However, there is one more consideration you need to be aware of, if your options are still open between these two tax relief solutions after reviewing their individual requirements.
With a Partial Payment Installment Agreement, the IRS is able to review your financial situation annually to determine if your financial prospects have improved and you might be able to pay more of the debt owed than originally agreed, as long as the debt is still within the statute of limitations. Conversely, because Offer in Compromise is a one time payment, the IRS does not maintain the ability to require a taxpayer to pay more in the future if their financial situation improves. However, the IRS is also aware of this fact, and when possible, is more likely to accept a Partial Payment Installment Agreement over an Offer in Compromise.
If you’re currently considering whether a PPIA or an OIC is the right step forward for you, it’s time to contact a tax resolution specialist. Don’t go it alone! To learn how new clients can schedule a free consultation, give the team at Bullseye Tax Relief a call today at (844) 582-3323, or send us an email at firstname.lastname@example.org.
In our next blog post, Tax Resolution Services: Currently Non-Collectible, we’ll discuss the Currently Non-Collectible tax resolution solution and how it can give you some breathing room if you’re experiencing financial hardship by pausing IRS collection activities for a specified period of time.