If you owe a large tax debt that you can't afford to pay, the IRS probably has a payment plan you can apply for. Each plan has certain eligibility requirements and stipulations, so you'll have to pick the one that's best suited to your situation. One payment plan that lets you potentially have a portion of your tax debt forgiven is the partial payment installment agreement (PPIA).
How the PPIA Works
With the PPIA, you make monthly payments toward your tax debts for the duration of the collection period (usually 10 years). The monthly amounts are based on your financial situation and ability to pay, so the PPIA is one of the more manageable payment plans the IRS offers. If the full debt isn't paid off in 10 years, the remaining balance is forgiven.
However, one thing to keep in mind is that the IRS will review your financial situation every two years. Therefore, it's possible that the IRS will raise your monthly payments if it finds that you're financially able to pay more. You also have to meet certain requirements to qualify for the PPIA, such as owing a debt of $10,000 or more, having no or limited equity, and having your prior tax returns up-to-date.
Some other IRS payment plans have a way to forgive some of your tax debt, but not all of them. With the Offer in Compromise, for example, you may be able to get the IRS to lower your tax liability if they accept your offer—essentially forgiving a portion of the debt. With the PPIA, your debt will only be forgiven at the end of the payment period, which could be at least 10 years.
Choosing the Right IRS Payment Plan
If you have a complex tax situation, you may not know which payment plan option is the best for you. It could be the PPIA, or it could be an Offer in Compromise. Working with a professional tax attorney can help put you on the right track. At Gabaie & Associates, LLC, we help taxpayers like you navigate troubles with the IRS and resolve your tax debts as efficiently as possible. Call us today at (410) 358-1500 or send us a message via our contact form to schedule a free consultation.
