There is no doubt the an IRS partial payment installment agreement (PPIA) can be an awesome IRS tax debt settlement tool. The taxpayer can pay the IRS what they can afford each month after reasonable living expenses. Meanwhile, each month the IRS tax debt gets closer to extinction thanks to the statute of limitations on IRS tax debt.
If you are in the an IRS partial payment installment agreement, expect the IRS to want to take a peek inside your financial affairs.
Partial Payment Installment Agreement Requirements
The downside to a PPIA is that you never really know if you settled your tax debt until the statute of limitations has expired. As one of the PPIA requirements, the IRS is supposed to follow up with you every two years to see if your financial condition has improved. If so, they will expect you to pay more.
In our experience, we find that the 2-year review often does not happen. Some taxpayers have been in PPIA and never had the IRS bother them again. Additionally, some people who defaulted on their PPIA have escaped review of their financials, even thought the IRS' own Internal Revenue Manual requires them to do so.
The Treasury Inspector has found out about this and is now requiring more scrutiny of PPIA monitoring, is particular:
Recommendation 1: Revise the IRM to require that managers ensure that automated two-year reviews are properly scheduled and that financial analyses are performed prior to reinstating taxpayers that default on their PPIAs.
Management’s Response: IRS management agreed with this recommendation and will revise the IRM to require managers to ensure that automated two-year reviews are properly scheduled and to specify when financial analysis is required prior to revising or reinstating PPIAs.
Recommendation 2: Revise the IRM to require that the manual two-year reviews associated with PPIAs are fully documented and reviewed and are approved by the manager.
Management’s Response: IRS management agreed with this recommendation and will determine the type(s) of manual two-year review that will require management review and full documentation. They will also revise the IRM to include this information.
For taxpayers in a PPIA this means more two-year reviews, and a more thorough reviews of their financials.
So what should a taxpayer in a PPIA do?
If you have a PPIA that was agreed to years ago, now may be a good time to review your other tax debt settlement options.
- Enough time may have elapsed on any personal tax debts to discharge with a Chapter 7 bankruptcy. In many cases, Chapter 7 bankruptcy can completely wipe out your debt. Be sure to talk to a local tax bankruptcy expert in your area.
- Or, it may be time to consider an Offer in Compromise. It is our experience that the Offer in Compromise units have been accepting Offers they would not have back in 2009. Our suspected reason: We don't think the IRS believes the economy will rebound any time soon. The IRS is agreeing to settle for less because of practical concerns. The deal you may offer could be more than they expect to ever collect from you.
If you need assistance, contact us to schedule a free consultation.