The Partial Payment Installment Agreement allows a taxpayer to settle an outstanding tax liability for less than the full amount owed. Although it achieves much the same end result as the more popular Offer in Compromise, it is less well know and less frequently used. In spite of certain drawbacks, the Partial Payment Installment Agreement represents another viable tax resolution alternative for those taxpayers who are unable to pay the full balance of their tax debt.
The Partial Payment Installment Agreement was implemented in 2005 to accommodate taxpayers with limited financial resources who had an outstanding federal tax debt. At that time, legislation amended the Federal Internal Revenue Code to allow the IRS to enter into an installment agreement for either full or partial payment of a tax debt. Before this legislation was passed, the IRS only accepted installment agreements for payment of the full balance of an outstanding tax liability. This meant that the only option for settling a tax debt for less than the full amount owed was the Offer in Compromise. Since the Offer in Compromise has very strict eligibility criteria and is very difficult to obtain, many taxpayers who were unable to pay the full balance of their tax debt were left with no viable tax relief option prior to the passing of these amendments.
As with the Offer in Compromise, any taxpayer submitting an application for a Partial Payment Installment Agreement has to submit a complete and accurate set of financial records for careful review by the IRS. Because a Partial Payment Installment Agreement settles a tax debt for less than the full amount owed, an application is only accepted when the taxpayer in question can document that they are unable to pay the full amount of the debt. In addition, any taxpayer who is granted a Partial Payment Installment Agreement is subject to a complete financial review every two years. If the review indicates that the taxpayer’s financial situation has improved, the installment payments may be increased or the agreement may be terminated altogether.
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Professional Tax Resolution, Inc. is a tax settlement firm with over 15 years of experience helping clients resolve tax debt issues. Unlike many CPA firms, tax debt resolution is our entire business. Our services include, but are not limited to, filing back returns, amending returns, setting up Installment Agreements, submitting Offers in Compromise, filing petitions for Innocent Spouse Relief, removing tax liens and levies, stopping wage garnishments and audit representation. No matter what the tax debt issue, our goal is to provide the best tax settlement option available. Our process will always begin at the source of the problem and follow the solution through to a complete resolution.
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