Negotiating a Partial Payment Plan with the IRS

Posted on December 20, 2021

A Partial Payment Installment Agreement (PPIA) is a form of installment agreement offered by the IRS. It’s similar to a regular installment agreement, but instead of paying back your entire tax debt in monthly installments, you’ll be paying only a portion of the taxes you owe over time. While the PPIA sounds like an enticing option and a way to potentially save thousands of dollars, it is not a resolution that everyone is eligible for.

Am I eligible for PPIA?

The IRS will only negotiate with you if you have filed all the required tax returns and made the estimated tax payments.

To be eligible for PPIA, you:

Must owe at least $10,000
Are unable to liquidate your assets
Cannot have an active Offer-in-Compromise
Cannot be in bankruptcy

The IRS will consider whether you qualify for PPIA based on:

Current income
Ability to pay
Monthly expenses
Assets and their equity

The IRS will evaluate your assets to determine if its equity can be used to pay down the tax liability. You may be expected to use equity to pay liabilities, and if the equity is significant, the asset may be seized or levied. And if your assets can serve as collateral to obtain a loan, you may not be granted a PPIA. However, there are reasons why your assets may be considered off-limits, such as having a non-liable spouse who does not agree to have their share of the asset sold or selling the asset creates a financial hardship.

Filling out the Installment Agreement Request initiates the PPIA request process. You’ll be required to fill out a Collection Information Statement and submit all your financial records, including:

Paycheck stubs
Invoices
Bank statements
Investment account statements
Loan account statements
Credit card statements
Utility bills
Monthly living expenses bills
Previous year’s income tax return

The IRS will determine if you have any money to go towards your tax debt or if your income qualifies you for a regular installment agreement.

It is advisable to work with a tax professional at this time to help you understand what you can afford to pay each month. It’s important not to commit to an amount you cannot afford; defaulting on the payment agreement means having to start the PPIA request process all over again. A tax professional can evaluate your finances as an IRS agent would, calculating a reasonable installment amount based on your income and expenses. The IRS will always recommend that you pay the maximum of what you can afford to reduce interest and penalties.

Also, any requests for additional supporting documents should be submitted before the deadline; missing a deadline can be reason enough for the IRS agent evaluating your account to reject your request.

The IRS will only accept the agreement if they determine that your financial situation means you lack the monthly disposable income to qualify for a regular installment agreement. This makes determining whether you are eligible for PPIA tricky.

If you need help determining whether PPIA is the best option for you, contact us at 206-970-4477. Talk with a Tax Resolution Expert today. We’re here to help Seattle business owners with their tax concerns and troubles.