Should You Be Utilizing Partial Pay Installment Agreements?

Partial pay installment agreements (PPIA) are exactly what they sound like: an agreement between a taxpayer and the IRS that allows the taxpayer to pay off their tax debt in full, but over a longer period of time. The key difference between a PPIA and an Offer in Compromise (OIC) is that with an OIC, the amount paid to settle the tax debt is less than what was originally owed.

We’re here to tell you if it’s a route you should consider.

Consider Your Circumstances

The first step in deciding if a PPIA is the best option for you is to assess your situation. How much do you owe? How long will it take you to pay it off? What other debt do you have that needs repayment? These are all questions to consider before making any decisions.

If your tax debt is too large to pay off in one lump sum, a PPIA might be the right choice for you.

The IRS allows taxpayers a certain amount of time to pay off debt that through different payment options:

  1. Short-term payment plan (180 days or less)
  2. Long-term payment plan (paying monthly)

Long term is much more time than the average taxpayer would need and could make the repayment of tax debts more affordable and manageable.

Take Advantage of the Benefits

Partial pay installment agreements are a great way to get on track with your tax debts. Your payment plan will be based around what you can afford, and any penalties or interest accrued will stop adding up past the date of the agreement. This means that you won’t have to worry about additional charges if you can keep up with the payments.

In addition, once you have paid off your debt in full and can provide proof of payment, the IRS will release any liens they have put on your property or assets. This can be a huge relief for taxpayers who may be worried their wages or other possessions are at risk.

Be Wary of the Drawbacks

Although a PPIA can be beneficial, it’s important to consider the drawbacks of such an agreement. The main issue is that if you fail to make a payment in time or miss one altogether, the IRS could threaten to revoke your agreement and start collecting payments again. This means they could garnish wages or seize property until the debt is paid off.

It’s also important to remember that the IRS will still report your tax debts when they are under a PPIA agreement. This could hurt your credit score and make it more difficult to obtain loans in the future.

The Bottom Line

Partial pay installment agreements can be a great way to pay off your tax debts in a manageable way. But it’s important to weigh the pros and cons before signing up for one.

If you feel like a PPIA might be right for you, make sure to reach out to an experienced tax professional who can help guide you through the process and walk you through your options. Good luck!