Did you know that as a taxpayer who owes income taxes to the IRS, you may qualify for a payment plan that if all payments are made, will not completely pay your tax debt within the 10 years that the IRS has to collect income tax debt? Many taxpayers who come to our Richardson, TX tax office are not aware that this is possible. This installment payment alternative is called the Partial Pay Installment Agreement (PPIA). The PPIA was created by the American Jobs Creation Act of 2004 which amended IRS Section 6159 to provide authority.
Who Qualifies for the PPIA?
Taxpayers may qualify for a Partial Pay Installment Agreement, when the calculated amount that a taxpayer can pay through an Installment Agreement, will not full pay their tax debt prior to expiration of collection statute of limitations. While the ability to pay with current income is the primary factor, the equity in assets must also be considered when qualifying.
As with other installment agreements, an IRS must be in tax compliance when a PPIA is set-up.
What is Required for PPIA Approval?
The Taxpayer will be required to complete the appropriate Form 443(Versions A, B and/or F) when requesting a PPIA. The Form 443 is a Collection Information Statement and includes information about the Assets, Liabilities, Income and Expenses of the taxpayer. This information is what is used to calculate the taxpayer’s calculated cash flow for an Installment Payment. The Taxpayer may be required to document these numbers and/or explain changes from prior tax returns.
In addition to looking at the taxpayer’s cash flow, the IRS may be reviewing assets of the taxpayer to determine if any can be liquated or borrowed against. While the taxpayer may not be able or required to do so, the IRS will likely explore these alternatives.
Is a PPIA Permanent?
In general, the financial status and terms of a PPIA are to be reviewed every two years. This does not always happen. There may be internal monitoring of taxpayers that identifies which taxpayers need to be reviewed.
Statute of Limitation Waiver on Collections
There are certain cases where the IRS can request a waiver of the 10 year statute of limitations with PPIA’s. This waiver can be up to 5 years. One example would be when it is known that the taxpayer will be coming into possession of an asset in the future. For example, a payment from a Trust is due in 2 years and the CSED expires in 1 year. In this case, the IRS should request a waiver. A waiver can only be secured at inception of a PPIA, not during the 2 year review, unless a new PPIA is executed at the same time.
Do You Need Help With an Installment Agreement or other IRS Issue?
If you need help an IRS tax issue, I’d be happy to talk with you. Please give me a call at (972) 821-1991 or email me at bob@jablonskyandassociates.
