Low Monthly Payments With the Possibility of Settlement
If you cannot afford to pay your tax debt in full or make the minimum monthly payments on a payment plan, then, consider a partial payment installment agreement (PPIA). PPIA let you make low monthly payments until the collection expiration date. On that day, the remaining tax debt expires, and you no longer have to make payments.
To learn more about these payment plans and other tax relief options, contact Damien’s Law by calling (601) 873-6510. We can analyze your unique situation and help you find relief.
Key takeaways
- Partial payment installment agreement – Make low monthly payments until the Collection Expiration debt. Then, the IRS waives the remaining debt.
- Application – Apply for a payment plan and provide a collection information statement.
- Terms – The IRS will require full payment if your financial situation improves.
What Is a Partial Payment Installment Agreement?
This is a type of payment plan where the IRS allows a taxpayer to make monthly payments based on their disposable income and assets. The taxpayer must make payments until the tax debt expires (typically 10 years after assessment). When the debt expires, the remaining amount doesn’t have to be repaid.
However, while on a PPIA, taxpayers are subject to financial checkups from the IRS. Typically, the agency just puts a note in the system to check your returns every two years. If your income increases, the IRS will contact you about making larger payments, or they may demand payment in full if your situation indicates that you can afford that.
Reasons to Consider a Partial Payment Plan
You may want to consider applying for a PPIA in the following situations:
- You owe a large debt but do not have enough assets to liquidate to pay off the liability.
- You cannot afford to pay off the tax debt in monthly payments before the Collection Statute Expiration Date.
- The IRS has rejected your Offer in Compromise application.
- You have too much disposable income to qualify for currently non collectible status – where the IRS pauses collection actions due to financial hardship and you don’t have to pay anything.
- You cannot afford to pay much, and a tax attorney has suggested this option to you.
How to Apply for a Partial Payment Agreement
To apply, contact the IRS directly or find a tax attorney to help you. You can start the process by calling the IRS or filing Form 9465 to request a traditional installment agreement. But then, you also need to submit a collection information statement to show the IRS how much you can afford to pay.
Individual taxpayers should complete Form 433-A. Businesses should complete Form 433-B. These forms collect information about your income, expenses, assets, and debts.
Ultimately, the IRS will attempt to obtain a clear picture of your financial situation and why you cannot afford to pay off all of the debt you owe. Your tax lawyer can help identify documents and legal arguments to help establish your perspective with the tax authorities.
Eligibility Criteria for a Partial Payment Installment Agreement
You must meet all of the following eligibility criteria to qualify for a partial payment plan:
- Able to pay some but not all tax debt.
- Filed all required tax returns – typically the last six years are required.
- Stay current on tax return filings and pay all required estimated tax payments
- Not in an active bankruptcy case.
- Does not have an active offer in compromise
- Completed the required IRS forms and submitted supporting documents as required.
Depending on how much you owe, the IRS may investigate the claims made on your application form. For instance, the agency may check public records to ensure that you reported all of your assets. They may carefully review the fair market value of your home or other assets reported to ensure that you didn’t underestimate their value.
Applying for a PPIA When You Have Assets
Taxpayers who have assets may find it more difficult to qualify for a partial payment plan. If you have significant assets, the IRS may require you borrow against them or liquidate them.
However, the IRS will consider the following scenarios:
- If selling the assets or encumbering them would create a financial hardship.
- If your spouse does not owe any taxes and doesn’t want their share of the assets sold.
- If the asset’s value is insufficient to allow a creditor to loan funds on it.
- If selling assets would not be sufficient to pay off the tax debt.
It can be complicated to apply for and be approved for a partial payment plan with the IRS. A knowledgeable tax lawyer with Damiens Law can assist with the application process and try to minimize the amount of the monthly tax payment. You can authorize your tax lawyer to communicate with the IRS on your behalf and to request a partial payment installment agreement.
What to Expect After You Apply
After you submit the application, the IRS will usually respond to the request within 30 days, but sometimes, it may take longer. If you do not hear back by then, you may want to contact them and inquire about the status of your application. You can make monthly payments while your application is pending.
The IRS may also request additional information from you after you submit your application. You may receive a letter from the agency requesting specific information and a deadline to provide it. If you miss the deadline, the IRS may reject your proposal.
What If the IRS Rejects Your Application?
If the IRS rejects your request for a PPIA, you can appeal. Consider working with a tax attorney to reduce the risk of getting your installment agreement rejected.
You have 30 days after you receive the rejection to appeal. During the appeal, you can explain why you should qualify and share new documents if you have them. You can also talk with the IRS about other payment alternatives.
What to Expect If You’re on a PPIA
Even after your partial payment plan agreement is accepted, the IRS can review the plan every two years. They will determine if your financial situation has improved enough that you can afford to make higher payments. Typically, the agency assesses your finances by monitoring your annual tax return, but alternatively, they may contact you to request a new collection information statement.
If the IRS notes that your finances have improved, they will terminate your agreement and request payment in full or larger monthly payments. However, you may be able to refute this with proof that you cannot afford a higher proposed payment. Generally, you must respond to the plan termination letter within 30 days.
You are also required to stay compliant with tax laws while you are on a PPIA. If you don’t file a tax return, miss a quarterly payment, or incur new tax debt, the IRS can default your arrangement.
Alternative IRS Payment and Relief Options
The PPIA isn’t the only option for taxpayers who owe back taxes. Let’s look at how this program compares to other IRS relief options.
PPIAs Vs Installment Agreements (IAs)
With a streamlined installment agreement, you get up to six years to pay off up to $50,000 in tax debt. If you need longer or owe more, you can still set up payments, but you need to provide a collection information statement.
Take a look at how PPIAs and IAs compare in different categories:
- Monthly payment – Based on your disposable income on a PPIA. Structured to pay off the tax debt in full for an IA – typically the tax debt divided by the term of the payment plan.
- Payment term – Both PPIAs and IAs can run until the collection expiration date at the longest.
- Monthly payments – The monthly payment on an IA must be enough to pay off the tax debt in full by the collection expiration date.
- Collection information statement – You don’t need to file a collection information statement for an IA if you owe less than $50,000, set up direct debit and have a history of compliance. You must file a financial statement for all other IAs and for all PPIAs.
- Ongoing requirements – With both options, you must stay compliant with filing and paying taxes. However, with a PPIA, the IRS can rescind the agreement if your finances improve.
- Settlement – There is a chance that you may not have to pay all of the taxes with a PPIA. In contrast, you always pay the full bill through an IA.
PPIA Vs. Offer in Compromise (OIC)
An offer in compromise lets you settle your debt for less than owed. Here’s how it compares to a PPIA:
- Payments – PPIAs require monthly payments until the collection expiration date. OICs require a single lump sum payment or up to 24 monthly installments.
- Settlement – You effectively get a settlement with both PPIAs and OICs. In both cases, you end up paying less than owed.
- Application – Both programs require a collection information statement, but the OIC uses a more detailed version. For example, individuals file Form 433-A for a PPIA but must file Form 433-A (OIC) if they want to apply for an offer.
- Response time – The IRS often responds to PPIAs in just a month or so, but it often takes several months or up to a year to get a response for an OIC.
- Probationary period – With an OIC, if you don’t stay compliant with tax laws for the next five years, the IRS can rescind the agreement. Once a PPIA is over, the IRS cannot demand payment of the amount that was settled.
PPIA Vs. Currently Non Collectible Status
If you qualify for currently non collectible status, you don’t have to make any payments. The IRS will stop collection actions against you. However, like a PPIA, the IRS will review your financial situation and may require payments if your finances improve.
Contact Damiens Law for tax legal advice and guidance
The knowledgeable team at Damiens Law is here to assist you with resolving your tax debt. We can advise you on how to request a partial payment plan with the IRS and discuss other options.
If you would like more information on partial payment plans or alternatives, consider contacting a knowledgeable tax lawyer with Damiens Law by calling (601) 873-6510.
Contact us online or call (601) 873-6510 to schedule a free consultation.
