Law Offices of Maryam M. Golbarg, P.C.
Your Tax Relief Attorney
Tax Solutions
Partial Payment Installment Agreement (PPIA)
A Partial Payment Installment Agreement (PPIA) is a payment arrangement with the IRS where you will make regular monthly payments to the IRS, but you will not pay off the entire tax liability by the time that the tax liability expires. It is based on what you can afford to pay, not what you owe to the IRS.
Depending on your ability to pay, the monthly installment agreement can be a small amount per month — as low as $25.00 — and you may pay less to the IRS than what you owe, just like an Offer in Compromise. Accordingly, it can offer huge saving, especially if the Collection Statute Expiration Date (CSED) is running out. It is in a way an alternative to an Offer in Compromise (OIC) when you are not qualified for one — such as when your future income potential make you ineligible for an OIC.
The IRS has 10 years from the date of assessment of a tax liability to collect the tax liability, which is called Collection Statue Expiration Date (CSED).
A PPIA can be granted to both individual and business taxpayers. However, because a partial pay installment agreement will not fully satisfy the liability, the Trust Fund Recovery Penalty (TFRP) will usually be assessed, and the IRS may request to extend the Assessment Statute Expiration Date (ASED) for assessing the TFRP against these liability.
PPIA's Pros
- Affordable monthly payments;
- Potential for large tax savings, because if the CSED expires before the IRS can collect the full liability, the IRS is no longer able to collect the remaining tax liability;
- Stop enforced collection action such as wage garnishments or bank levies.
PPIA's Cons
- A full Collection Information Statement is required to determine your ability to pay;
- The IRS usually files a Federal Notice of Tax Lien to protect its interests;
- Unlike other types of installment agreement, the IRS may revisit your ability to make a larger monthly payment, typically every two years;
- It is hard to qualify and in some cases, the taxpayer will be required to sell assets or borrow on equity in assets to pay tax liability down prior to entering into a PPIA; although complete utilization of equity is not always required as a condition of a PPIA.
Requesting a PPIA is less time-consuming than requesting an offer in compromise, but it still requires attention to detail, and you have to know the rules. It requires disclosing your financial information to the IRS and thorough negotiation. As with any other installment agreements with the IRS, you should comply with the terms and conditions, including but not limited to:
- Filing all prior required tax returns;
- When in an PPIA, you must file all required future tax returns when due and pay all the associated taxes in full, otherwise the IRS will default your PPIA.
Contact us to find out if you are qualified for a PPIA and if a PPIA is the right solution for your tax problems.
