The IRS Partial Payment Installment Agreement: Do You Qualify?
For some debtors, paying off their tax debt in full is impossible. If a true financial hardship can be proven, the Internal Revenue Service (IRS) can permit a debtor to enter what is known as a “Partial Payment Installment Agreement” (PPIA). This is an agreement that requires the debtor to pay off a certain amount of their debt, by equal and manageable monthly installments.
Partial Payment Installment Agreement Vs. Other Installment Agreements
The partial payment plan differs from other IRS installment agreements in these ways:
- With PPIA, a debtor does not have to pay their entire tax debt. But, unlike other installment agreements, PPIA requires lots of financial documentation to prove to the IRS that a debtor is in true financial hardship and unable to pay their full tax debt.
- Comes with a 2-year review. Unlike other IRS installment agreements, the IRS may reconsider the terms of a debtors PPIA after the 2-year review of their financial situation
- The application process is longer. A streamlined installment agreement can be set up almost instantly, but in the case of a partial payment installment agreement, it can take up to a month to be approved.
Who Should Consider a Partial Pay Installment Agreement?
You may qualify for a PPIA if:
- You owe a large debt, and you don’t have enough assets to liquidate (there are exceptions).
- Your monthly disposable income doesn’t qualify for a regular IRS installment agreement.
- The IRS has recently rejected an Offer in Compromise.
- The IRS believes you’re not going to earn money to cover your debt in the coming years.
Partial Payment Installment Agreement (PPIA) Vs. Offer in Compromise (OIC)
The most appealing feature of Partial Pay is it’s easier to obtain than an Offer in Compromise.
- Applying for a PPIA is easier. PPIA takes 30 days or less to process. An Offer in Compromise can take up to 2 years to be approved.
- There’s no 5-year probation. Unlike the OIC, a debtor doesn’t run the risk of owing the entire tax debt amount again due to late filing of tax returns or missing payments.
- Less hassle than the OIC. A Partial Installment Plan is easier and faster to get than OIC, less paperwork is required compared to OIC.
- (Often) Lower monthly payments. Although the IRS can increase the monthly payments on a PPIA, there is no lump sum payment.
- Extension of IRS statute of limitations on collection (SOL): In the case of OIC, the IRS may extend the amount of time in which they can legally collect a tax debt.
Does this mean a debtor shouldn’t apply for an Offer in Compromise?
Sometimes an Offer in Compromise could be better than a PPIA. The most significant advantage of OIC is finality. If a debtor qualifies for an OIC, the total amount paid could be less, regardless of the amount they make after the deal.
IRS Partial Pay Installment Agreement Requirements:
To qualify for PPIA, a debtor needs to meet these specific requirements according to the Internal Revenue Manual:
- Can pay the IRS, but cannot pay in full.
- Filed and paid tax returns for previous years.
- Owe over $10,000 in tax debts, interests, and penalties.
- Have not filed for bankruptcy.
- Have not had an Offer in Compromise accepted.
- Completed Form 433.
- Completed Form 9645 or applied for Installment Agreement.
- Have no marketable assets or can’t access the equity in assets.
- The sale of the assets or loan on those assets would create a financial hardship on the debtor.
- Their spouse owes no tax liability and does not want their part of the assets sold.
- The asset is not enough to allow a creditor to loan funds.
- Selling assets would not cover the tax debt.
Conclusion: How Can CuraDebt Tax Assist You?
If you’ve received an IRS final notice or a threatening letter, don’t ignore it. You may qualify for a Partial Payment Installment Agreement, and you may be able to settle your debt for less than you owe. At CuraDebt Tax, we have a team of tax professionals who are able to find the best IRS resolution available to you. Contact us to better understand your tax problems and to choose the best IRS resolution option.
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