Dec 19, 2007

Your tax debt- Part 18 – More on The Partial Pay Installment Agreement- an Offer in Compromise in disguise

The often underestimated and underused tax resolution option is the partial pay installment agreement or “PPIA”. This option is excellent if you cannot qualify or pay an Offer in Compromise for any reason and your monthly disposable income (“MDI”) and net realizable equity in assets cannot pay the tax liability in full before the collection statute (“CSED”) expires (normally ten years from the date of assessment)

A PPIA is defined simply as: an IA when the amount of payments do not pay the tax in full before the CSED expires.

It is almost as difficult to negotiate as an Offer in Compromise. However, it is better in many respects if you cannot qualify for an Offer for such reasons as:

1. You cannot pay the Offer amount
2. You cannot even pay the 20% down payment if you do not qualify for a low-income exclusion
for the 20% down payment
3. You do not want to extend the CSED
4. Your CSED are imminent
5. You have assets that are not liquid but have equity
6. You believe an Offer investigation to be too intrusive

One down side of a PPIA is that Internal Revenue Code § 6159 requires that PPIAs be reviewed every two years. We have found PPIA’s reviews to be inconsistent with the IRS policy. However, increased enforcement may breed more PPIA follow-ups, especially if the income reported to the IRS is substantially more than what was proven to them during the PPIA negotiation.

PPIAs are like OICs- very difficult. It is recommended that you consult a competent tax professional for all of your options and questions.

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