Resolving Tax Debts Through Partial Payment Installment Agreements

Описание: When you owe taxes to the IRS, the agency will expect that you fully pay everything you owe. And the IRS will use its vast resources and extraordinary collection powers to fully collect. But the tax laws provide that the IRS’ collection of past due taxes should not cause hardship. Put another way, when you owe taxes, you should only pay what you can afford to pay. And the tax laws provide various alternatives to full payment of tax debts.
A recent audit of the IRS found that the agency was failing to provide taxpayers with sufficient information related to one such collection alternative, the partial payment installment agreement. I’m here to tell you about the audit’s findings and to give you information about this collection alternative, which the IRS has apparently been trying to keep hidden.
The IRS has extraordinary collection powers – it can seize property such as money in your bank, investment, or retirement accounts, and it can seize real property and personal property. I’ve even seen the IRS get court orders to go behind businesses’ counters and take cash directly from cash registers.
But Congress has, thankfully, put some constraints on IRS Collection within the tax code. The interest of the government in collecting outstanding taxes are balanced against the interests of taxpayers. And tax collection should never cause a hardship. Certainly, what constitutes a hardship is going to depend on our individual circumstances. But the procedure is to allow everyone certain basic reasonable living expenses, and only earnings above those living expenses are amounts that the IRS can look to collect. And the reasonable living expenses can be higher for some, depending on their specific circumstances.
To help implement this more humane aspect of the tax laws, the law provides for certain alternatives to full payment of tax liabilities. One such alternative is the partial payment installment agreement or PPIA.
All things come to an end, and that includes tax debts. The IRS has 10 years to collect a tax debt. At the end of those 10 years, if the IRS has not fully collected, the tax debt is written off.
Now when we cannot fully pay our tax liabilities, we’re allowed to pay them over time through an installment agreement. But what if the amount that we can afford to pay every month doesn’t satisfy the full tax debt within the 10-year period? That’s where the PPIA comes into play – we make payments to the IRS that we can afford even though the payments will never fully satisfy our tax debt. Then after the 10 years expire, the remaining balance is extinguished. We’re free to move on with our lives.
As the payments are based on our ability to pay, the monthly payments in PPIAs can be quite low. And while the PPIA is in effect, the IRS is prohibited from collecting anything additional from you.
While the tax law seeks to strike a balance in the tax collection process to prevent individual hardship, the IRS is an agency that justifies itself by touting how much money it brings in. Because of that, the IRS tends to place a thumb on the scale of collection at the expense of imposing unnecessary hardship.
A recent audit of the IRS confirms this by finding that the IRS makes no mention in its public and private communications to taxpayers of PPIAs, the procedure for requesting a PPIA, or what the IRS considers when determining whether to grant a PPIA. In addition, the audit found that those few who were able to get into PPIAs defaulted on the payment terms at a greater rate than those on regular installment agreements. This may indicate that the IRS sets the payment terms for PPIAs unreasonably high based on the taxpayer’s circumstances.
While the IRS does not seem to want to provide the public with information about partial payment installment agreements, I’ve tried to provide you with a general overview so that you know that this collection alternative is out there. Even if you have an option, it doesn’t exist if you don’t know about it.

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