Partial Payment Installment Agreement (PPIA) is an IRS payment plan in which the taxpayer pays their tax debt in affordable monthly installments until the debt expires. After the debt expires, the tax debt is essentially forgiven. Those that cannot afford to pay their full tax liability can consider applying for PPIA or Offer in Compromise. Both these payment plans offer tax debt reduction.
Qualifying for Partial Payment Installment Agreement
To qualify for PPIA, you must:
- Have filed all previous tax returns
- Not have the financial capability to pay your full tax debt, and
- Be able to pay the minimum monthly payments without defaulting
When applying for a PPIA, you need to provide a complete financial statement to the IRS. The IRS examines this financial statement to determine your ability to pay. The IRS will consider using your equity in assets to pay the full tax debt. They will also take into account your income and expenses. Depending upon your ability to pay, the IRS will fix the amount to be paid each month. You can negotiate the monthly payments with the IRS.
Important Factors to Know
After you qualify for PPIA, the IRS will conduct a financial review at least once every two years. This is done to see any improvements in your financial condition. If the IRS sees a significant improvement, they may increase the amount of your installment payments or terminate the agreement.
The IRS encourages taxpayers to make the monthly payments through direct debit. Upon non-payment of a monthly payment, the IRS may terminate the agreement.
The IRS can only set up a Partial Payment Installment Agreement before the expiry of the 10 year statute of limitations. Before the collection statue ends, the IRS will use every tool at its disposal to collect back taxes.