Partial Pay Installment Agreement

A Partial Payment Installment Agreement can be an attractive alternative to an Offer in

Compromise. Navigating a PPIA application can be complex, and professional guidance

is needed for the best possible outcome.

Basic Definition: A Partial Pay Installment Agreement is an arrangement you can

make with the IRS if you owe taxes but cannot pay them in full. Under a PPIA, you

agree to make regular payments toward your tax debt, but these payments will not

cover the total amount owed when the collection statute expires. After the statute

expires, you need not make any more payments.

Key Features of PPIA: Lower Payments: The monthly payment amount is based on

what you can reasonably afford after accounting for essential living expenses, not the

total amount owed.

Assessment of Financial Situation: The IRS will review your income, expenses, and

asset equity to determine your ability to pay.

Tax Debt Exceeds Repayment Capacity: This agreement is beneficial if your tax

debt is so substantial that you cannot realistically pay it off in full.

Benefits of PPIA: Avoiding Collection Actions: Entering into a PPIA can prevent or

stop aggressive IRS collection actions, such as levies or garnishments.

Flexibility: Payments are tailored to your financial situation, making them more

manageable.

Compliance Requirement: To qualify and maintain a PPIA, you must stay compliant

with all filing and payment requirements moving forward.

Considerations

Interest and Penalties: Interest and late-payment penalties continue to accrue on

the unpaid balance.

Review of Financial Situation: The IRS may review your financial situation every two

years, which could lead to an adjustment in your payment amount.

Limited Time Frame: The agreement lasts until the collection statute expires,

generally ten years from the Process of Applying for PPIA Application: You apply for a PPIA using IRS Form 433-F (Collection Information Statement).

Proposal of Payment Amount: You propose a monthly payment based on your

financial situation.

IRS Evaluation: The IRS evaluates your proposal and decides if it's acceptable based

on your ability to pay.

Documentation: Providing accurate and comprehensive financial information to the

IRS is crucial.

Future Tax Compliance: Stay current on all future tax obligations; failing to do so

can lead to the cancellation of the agreement.

Conclusion

A Partial Pay Installment Agreement can be a viable solution if you're facing significant

tax debt and can't afford to pay in full. It allows for manageable payments while

protecting you from harsh collection actions. However, it's essential to approach this

option with a clear understanding of its implications and requirements. As your tax

professional, I'm here to guide you through this process and help you make informed

decisions based on your financial situation.