When you owe a tax debt to the IRS, you may be eligible for a payment plan. The IRS has several plans available, including the partial payment installment agreement (PPIA) and the Offer in Compromise (OIC). Let's compare the two to see which might be best for your situation.
What Is a PPIA?
A PPIA allows you to pay back your tax debt in manageable monthly installments based on your ability to pay. Once the Collection Statute Expiration Date (CSED) is reached—usually 10 years after the tax debt was assessed—any remaining balance is forgiven.
Pros of a PPIA
- Monthly payments are based on what you can afford, making it more manageable.
- Any remaining balance after the CSED is forgiven.
- It can be a good option if you don't qualify for the Offer in Compromise.
Cons of a PPIA
- The ongoing interest and penalties accrue until the debt is either paid or forgiven.
- The IRS reviews your financial status every two years and can adjust your monthly payment based on these assessments.
- You must meet strict eligibility criteria for the PPIA, such as having no realizable equity in assets.
What Is an Offer in Compromise?
With an OIC, you can settle your tax debt for less than the full amount owed. It's typically granted when paying the full debt would cause financial hardship or if there's doubt about liability or collectibility. With an OIC, you would offer to pay a lump sum or make short-term payments.
Pros of an OIC
- It's possible to settle the debt for a fraction of the total liability.
- Once the IRS accepts, the case is resolved.
- An OIC might be an option if full payment would cause severe financial hardship.
Cons of an OIC
- The OIC selection process is strict; only 40% of applications get approved.
- You must provide detailed financial information to prove you can't pay.
- You must convince the IRS that accepting the offer is the best way to collect revenue.
Read more details about the OIC on our Offer in Compromise resource page.
Get the Best IRS Payment Plan for Your Needs with a Reliable Tax Attorney
If you're unsure which option is right for your situation, consulting a tax attorney is crucial. At Gabaie & Associates, LLC, we can analyze your finances, determine eligibility, and guide you toward the best solution for resolving your tax debt. Call us today at (410) 358-1500 to request a free consultation. You can also fill out our contact form, and we'll reach out to you.
