No one enjoys being in debt to the Internal Revenue Service (IRS). Unfortunately, people sometimes make critical errors in their payments or miss paying their taxes for a period. As a result, they may find themselves struggling to make those vital payments — especially if they have years of tax debt or other challenges with which to contend.
A partial payment installment agreement (PPIA) can help you meet your obligations to the IRS without destroying your financial stability. Are you eligible for a partial payment installment agreement? How can you set one up? Here’s what you need to know about the process, and why you should contact an experienced tax attorney to learn more about your options.
What Are Partial Payment Installation Agreements?
PPIAs allow you to pay off your debt to the IRS over a set period of time rather than all at once. In order to request a partial payment installation agreement, you need to:
- Owe more than $10,000 to the IRS
- Have already filed all of your tax returns
- Be unable to reasonably expect to pay off your full tax debt in a reasonable period of time, based on your current income and other available assets
- Not be in bankruptcy
- Have not had a past offer in compromise accepted by the IRS
A PPIA creates a payment plan for taxpayers to pay down their debts in a reasonable manner. The amount of your payments and reduction in your tax debt will depend on several factors, such as the amount of total debt, your ability to pay, and other elements of your financial status.
What to Know About Requesting a PPIA
There are several key things you need to know about requesting a partial payment installment agreement for your tax debt. First and foremost, keep in mind that the IRS will still place a lien on you for the full amount, which will enable it to collect from you if you default on your loan. When you set up your PPIA, you are committing to keeping up with your monthly payments, and you may no longer have the option to pay the reduced amount of your tax debt if you default.
Here’s how the process works:
- Complete Form 433-A (individual) or Form 433-B (business).
These forms include personal, financial, and asset information, which can help the IRS decide if you’re eligible for a PPIA or if you need to look into different resolutions for your tax debt. This form may help show that you cannot make a full payment of your income taxes and establish why you need a PPIA to help you meet your obligations. If you are representing a business, you should keep in mind that the IRS can shut it down if you do not make vital tax payments. That means you should handle those obligations as soon as possible.
- Determine your tax liability.
Before you approach the IRS about a PPIA, make sure you have a solid idea of exactly how much you owe in back taxes. In addition to your initial tax debt, this will include any penalties that were added to your tax debt.
- Complete Form 9465
Form 9465, the installment agreement request, includes the amount you would like to be able to pay toward your tax debt each month. Work with an experienced tax attorney to get a better idea of how much you can afford. Make sure you take into account your current disposable income, lifestyle, bills, and other expenses. Keep in mind that you may need to adapt your lifestyle to take care of back taxes and meet IRS obligations.
- Submit a letter.
In addition to the forms associated with your request, you should work with a tax attorney to submit a written request for a partial payment installment agreement. Make sure you include any information about your financial status and living expenses as well as why you’re requesting the PPIA. Your attorney can help give you a better idea of what to include as part of your request letter, and help you establish a payment amount that meets your current financial needs.
- Wait for the IRS to respond.
Once you have submitted your paperwork, you will need to wait for the IRS to respond to it. It can take up to 30 days — in some cases more — for you to receive a response. The IRS may accept your offer, make alterations to it, or reject it based on your income, financial situation, and other factors.
Keep in mind that you do owe this debt to the IRS and have failed to pay it. If the IRS grants a PPIA, you can reduce your debt and decrease your tax payments, but the agency is not obligated to do this. Working with an experienced tax attorney can increase your odds of having your offer accepted.
The Importance of Making Your Payments
Once you have entered into a partial payment installation agreement with the IRS, it is critical to make sure you make your payments on time. If you default, you could find yourself again facing the full burden of your initial tax debt.
Here are some tips:
- Consider setting up direct debit to have the funds come directly out of your bank account each month or placing those payments on a credit card, if needed, to ensure you do not miss any payments.
- Keep in mind that repayment does not have to adhere to the minimum monthly payment.
- You can choose to pay off the total amount at a later time or to increase your payments based on changed living expenses, income, or other financial changes in your life.
- Paying off your tax debt early can provide you with a greater amount of future financial freedom.
Need Help Requesting a Partial Payment Installment Agreement?
A PPIA can help you manage delinquent tax payments and resolve previous unpaid taxes. If you have tax problems, we can help! Contact Silver Tax Group to speak with an experienced tax attorney who can answer any questions you might have about partial payment installment agreements and how they may impact you.