Partial Payment Installment Agreement: How to Apply & Qualify
A partial payment installment agreement (PPIA) is when you make payments towards your debt that are lower than are required with a standard IRS installment agreement. This means that some of the debt may be forgiven since the debt won’t be collected by the collection statute expiration date (CSED). The IRS will check in periodically to see if your financial situation has changed to assess if you can pay more. If your financial situation has not changed, then it is likely the remainder of the debt will not be required to be paid.
How to Apply for a Partial Payment Installment Agreement
To apply for a partial payment installment agreement, you need to complete the following steps.
- Fill out Form 9465 (Installment Agreement Request Form). This form allows you to apply for a range of installment plans.
- Decide how much you can pay each month, and see if that amount meets the IRS’s expectations. Usually, the IRS wants you to pay off your tax debt within six years, and Form 9465 tells you to divide your tax debt by 72 to calculate the proposed monthly payment. For instance, if you owe $10,000, the suggested monthly payment is $139. If you can pay that amount or more, you can get a regular installment plan. If you can’t pay that much, you need to complete these steps and apply for a partial payment installment agreement.
- Complete IRS Form 433-F (Collection Information Statement). This form requests information about your assets, income, debts, and other finances. The IRS uses this information to decide whether or not to approve your payment plan.
- Write a letter stating that you want a partial payment installment agreement, and attach that to your forms.
- Gather three months of back up documentation for all income and expenses that you reported on Form 433-F.
- Send everything to the IRS and hope your plan gets approved.
For best results, you may want to work with a tax professional. The information you need to provide on Form 433-F is quite detailed and making a mistake can lead to rejection.
Assets and Partial Payment Installment Agreements
Generally, the IRS is more likely to approve your partial payment installment agreement if you have no assets. If you have assets, you may have to liquidate them to get your agreement approved.
However, there are some key exceptions. In the following situations, the IRS usually doesn’t require you to sell your assets.
- The asset is unmarketable.
- There is not enough equity in your assets to get a loan on it.
- Your spouse owns the asset but isn’t liable for the tax debt.
- The assets you own produce income that can help to cover your payment arrangements, and selling the asset would result in less money for the IRS.
- Selling the asset would create undue economic hardship for you. To illustrate, imagine your only asset is your primary residence. If you sold your home and had to rent, you wouldn’t be able to make ends meet. In situations like this, the IRS lets you keep the asset.
Even if your assets fall into these categories, you still need to list them on Form 433-F. To improve your chances of keeping your assets, you should hire a tax professional. They can help to convince the IRS that you don’t need to liquidate your assets.
Note that Form 433-F is a streamlined version of 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) and 433-B (Collection Information Statement for Businesses). In the past, the IRS used to require 433-A or B, and in some cases, the agency may still request those forms, as they contain more details.
Partial Payment Installment Agreements and the Collection Statute Expiration Date
There is a statute of limitation on tax debt, and once that statute expires, the IRS can no longer pursue collection activity. Typically, with a partial payment installment, you make payments on the debt, and when the collection statute expiration date occurs, some of the debt expires. The expiration date is a crucial part of these plans.
However, in some cases, the IRS may require you to sign a collection statute expiration date waiver. The waiver means that you agree that your debt won’t expire on that day. This tends to only happen in rare cases.
To explain, imagine that you have a trust fund, but you won’t start getting payments for three years. Your tax debt is due to expire in two years. In this case, the IRS may require you to sign the waiver, and the agency may expect you to pay a portion of your trust fund payments toward your tax debt. If you refuse to sign the waiver in a case like this, the IRS may not approve your agreement.
Two Year Reviews for Partial Payment Installment Agreements
Once you enter a partial payment installment agreement, the IRS does an automated review of your case every two years. If the automated review doesn’t show anything new, your plan should continue as expected. If something new shows up, the IRS may request a manual review, and you may be required to submit a new financial statement.
Approval for Partial Payment Installment Agreements
When reviewing your request, the IRS looks closely at the forms listed above. On top of that, you also need to be compliant with all past and present IRS obligations. That means you need to file all required old tax returns. You also must be current on your estimated quarterly tax payments or your federal tax deposits if you own a business. If you are employed, your employer needs to be withholding enough from your paycheck. If you need your employer to withhold more from your paycheck, ask to fill out a new W4 form. That’s the form where you note your exemptions.
Obtaining a partial payment installment agreement can be difficult, and you may want to use a tax professional to help with the filing. A tax professional can evaluate your finances and determine if the partial payment option is best you. Alternatively, a tax debt resolution specialist can help you apply for an offer in compromise (settling tax debt for less than you owe) or whichever arrangement is best for your situation.
Part Pay Installment Agreement Help
Installment Agreement Help
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Solutions To Settle Back Taxes
Different trusted tax solutions to settle back taxes if you cannot make payment in full or you don’t believe you should
Currently Not Collectible
Prove to the IRS that you do not have the means to pay your back taxes with your current financial standing. Hold of IRS until you can pay or until the statute of limitations expires.
Offer In Compromise
Settle IRS back taxes for a fraction of what is owed if you can prove you meet strict IRS specifications.