Partial Payment Installment Agreement
What is Partial Payment Installment Agreement (PPIA)?
A Partial Payment Installment Agreement (PPIA) is similar to any other type of installment agreement in that the IRS agrees to allow you to break down your tax debt into monthly installments in order to make it easier to pay. The difference with a PPIA versus a normal installment agreement is that the IRS agrees to allow you to pay only a portion of your debt over the allotted amount of time the IRS gives you, usually over the course of two years. In order to apply for a Partial Payment Installment Agreement, you must provide the IRS with a full financial disclosure featuring your wages, assets and expenses. If you cannot afford a regular installment agreement and the amount that you would be paying is unlikely to ever cover the full tax debt then a Partial Payment Installment Agreement may be the most beneficial course of action for you and your business.
What Are the Eligibility Requirements for a Partial Payment Installment Agreement (PPIA)?
Similar to an Offer in Compromise, 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.
The eligibility requirements for PPIA are:
Why Apply for a PPIA and Not an Offer in Compromise?
The IRS is more likely to accept a Partial Payment Installment Agreement over an Offer in Compromise because of its lack of finality. With a PPIA, the IRS has the ability to review your ability to pay off your tax debt annually and if your ability to pay the debt in full increases then the IRS can collect it, if they find this information before that statute of limitation. Because of this, the IRS is more likely to roll the dice than to give you an Offer in Compromise which is final and they would not be able to collect from you more than what was negotiated regardless of your future financial situation.
What is the Statute of Limitation?
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.
The application process for a Partial Payment Installment Agreement involves the submission of many forms and a lot of consideration. It is most beneficial to speak to a tax professional when considering applying for a Partial Payment Installment Agreement. A Partial Payment Installment is usually best if you do not think that you’d be eligible for an Offer in Compromise and a regular installment agreement is more than you can afford. Speaking with a tax professional may help you be better able to decide if an offer in compromise is really the best solution for you and your situation. Give us a call today and we can help you decide if filing for a Partial Payment Installment Agreement is the best course of action for you and your business.