When you owe taxes, it might seem like the only way to get out of having balances is to pay the entire balance at one time with a single payment. While some taxpayers may have to do that, there are options out there for you that can help you resolve your tax balances for less than you actually owe. One of these options is a partial payment installment agreement or a PPIA. A PPIA is an IRS resolution that allows you to settle your taxes owed for less money by making monthly payments for a set period of time. If you think a PPIA is right for you, here is what you need to know.
Partial Pay Installment Agreement (PPIA):
A partial pay installment agreement 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 you 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.
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. To be eligible, you cannot have an active OIC. 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 you’re your monthly payment should be:
- Your ability to pay
- Your current income
- All expenses you’re currently paying
- Your assets and their 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 attorney can argue for certain expenses and try to keep the monthly payment amount low.
When applying for a PPIA, you will fill out a Collection Information Statement. This will collect all your financial information so the IRS can look at your current finances and see what you can afford. You will then also fill out 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, as if you default the payment agreement, you may have to start the whole process over. You will send these to the IRS along with your most recent tax return. If you have a tax attorney, you can have them contact the IRS on your behalf to request the PPIA. The IRS will then contact you or your tax attorney 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 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 you could afford a higher payment. If your financial situation has improved they may try to raise your monthly payment. You or your tax attorney 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.
If you think a PPIA might be the best resolution for you to pay off your tax liability, you can have a tax attorney assist you in obtaining one. At Polston Tax, our tax attorneys negotiate every day with the IRS to try and get our clients the best tax resolution possible and we can do that for you. Give us a call at 844-841-9857 or click below to schedule a free consultation.