Who Qualifies for a Partial Pay Installment Agreement with the IRS?

Introduction
A Partial Pay Installment Agreement (PPIA) is a viable option for taxpayers who owe a significant amount of tax debt but are unable to pay the full amount. This type of agreement allows for monthly payments that are less than the total debt owed, with the possibility of the remaining debt being forgiven after the payment term ends. Here’s a guide to understanding who qualifies for a PPIA with the IRS.

Basic Eligibility Requirements
To qualify for a Partial Pay Installment Agreement, several criteria must be met:
Minimum Debt Amount: You must owe at least $10,000 in taxes, including penalties and interest. This threshold ensures that the IRS considers your case worth the administrative effort involved in setting up and maintaining the agreement.
Compliance with Tax Filings: All required tax returns for the past six years must be filed. The IRS requires this to ensure that you are current with your filing obligations before they agree to a payment plan.
No Active Bankruptcy: You cannot have an active bankruptcy case. Tax debts are often handled differently in bankruptcy proceedings, so an active case would complicate the PPIA process.
Financial Disclosure: You must provide a comprehensive disclosure of your financial situation. This includes income, expenses, assets, and liabilities, which are detailed in Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) or Form 433-F (Collection Information Statement). This information helps the IRS determine your ability to pay.

Detailed Financial Evaluation
The IRS conducts a thorough evaluation of your financial situation to assess your eligibility for a PPIA. Here are the key aspects they examine:
Income: All sources of income, including wages, business income, investments, and any other earnings.
Expenses: Necessary living expenses such as housing, utilities, food, transportation, and medical costs. The irs partial pay installment agreement Honolulu uses national and local standards to determine reasonable amounts for these expenses.
Assets: The value of your assets, including real estate, vehicles, bank accounts, and investments. The IRS evaluates whether you can sell or borrow against these assets to pay your tax debt.
Liabilities: Any outstanding debts you owe, which impact your ability to pay the IRS.

Ability to Pay
The core principle behind a PPIA is that you are unable to pay your full tax debt within the statutory collection period. The IRS looks at your ability to make monthly payments based on your disposable income, which is your income minus necessary living expenses. If your disposable income shows that you can only make partial payments, a PPIA may be considered.

Re-Evaluation and Compliance
Once a Partial Pay Installment Agreement is in place, the IRS will periodically review your financial situation, typically every two years. This re-evaluation ensures that your payment plan remains appropriate based on any changes in your financial circumstances. You must also remain compliant with all future tax filings and payments during the term of the agreement.

Conclusion
Qualifying for a Partial Pay Installment Agreement requires meeting specific criteria related to your debt amount, tax filing compliance, financial situation, and ability to make partial payments. Understanding these requirements and providing accurate financial information can help you navigate the application process and potentially secure a PPIA to manage your tax debt.

FAQs
What forms are needed to apply for a PPIA? You need to complete Form 433-A and Form 9465, along with supporting financial documents.
Can I apply for a PPIA if I have assets? Yes, but the IRS will evaluate your ability to liquidate or borrow against those assets to pay your tax debt.
Will the IRS continue to charge interest on my unpaid tax debt under a PPIA? Yes, interest and penalties will continue to accrue on the unpaid balance.
Can my PPIA payments change over time? The IRS may review your financial situation every two years and adjust your payments if your financial circumstances change significantly.
What happens if my PPIA application is denied? You can explore other IRS payment options such as a full-payment installment agreement or an Offer in Compromise.