Updated May 26, 2022
Representation before the IRS is extremely important, especially from someone with experience and expertise that negotiates with the IRS daily. A Treasury Inspector General for Tax Administration (TIGTA) report from March 2022 confirmed the importance of experienced representation. Taxpayers attempting to resolve an IRS liability on their own, or working with a local accountant or attorney, are at a severe disadvantage. TIGTA’s conclusions indicate they are likely unaware of an important option – the partial payment installment agreement (PPIA). With a PPIA, a business pays what it can afford to the IRS over time. Shouldn’t all agreements be based on what a business or individual can afford?
However, according to TIGTA, less than 2% of all IRS installment agreements are PPIAs. TIGTA concluded that figure is so low because the IRS deliberately does not tell taxpayers the PPIA is an option. The numbers confirm that the vast majority of taxpayers are not securing installment agreements based on their ability to pay. 95% of installment agreements fail – they are set up to fail when the payment is not affordable. Your agreement will likely set you up for failure if you are working with an inexperienced attorney or accountant. Assuming your revenue officer will help you secure the best deal possible is also a path to failure. Only a representative with experience and expertise can be trusted to secure an agreement that works for you.
What is a PPIA?
A PPIA, partial payment installment agreement, is an alternative for taxpayers who cannot repay their tax liability in full within the statute of limitations. Generally, the statute of limitations is ten years. PPIAs allow taxpayers to pay a portion of their obligations over time. Most taxpayers have some ability to pay, but cannot repay a tax liability within the statute of limitations. In those situations, a PPIA is an excellent option.
PPIAs were enacted by the American Jobs Creation Act of 2004. In a PPIA, the taxpayer makes regular monthly payments to the IRS, but the payments do not pay off the tax liability in full. Once the collection statute expires, the IRS cannot collect the remainder of the tax debt. PPIAs provide taxpayers with another alternative to settle their tax obligations.
Why Are PPIA Numbers So Low?
If you think your revenue officer will help you set up an installment agreement that works for you – think again. The IRS won’t tell you, or your local attorney or accountant, about the PPIA. TIGTA found that the IRS does not provide taxpayers with adequate information on PPIAs on its public website. Additionally, the instructions pertaining to the form used to request an installment agreement does not mention PPIAs. As a consequence, the IRS does not have an effective means for taxpayers to request PPIAs. If the IRS rejects a request for a PPIA, there is no effective means to appeal as required by law.
- The IRS’s website (www.IRS.gov) does not contain information on PPIAs or how to request one. The website has a link to payment options (“Pay”). However, none of the links provide information on PPIAs or mentions the possibility of partially paying a balance due.
- The IRS’s tax topics and tips searchable through the IRS’s website provide taxpayers with a wide range of tax information. However, the tax topics do not promote the benefits of a PPIA.
- Form 9465, Installment Agreement Request, and its instructions do not mention the PPIA. In TIGTA’s discussions with IRS management, IRS officials stated they would not change the form because: (1) the form already allows the taxpayer to propose any amount to pay monthly; (2) IRS employees would be inundated with PPIA requests if taxpayers were made aware of PPIAs on the form; and (3) rejected PPIAs would cause taxpayers to flood the Office of Appeals while pursuing their statutory rights to appeal.
In short, the IRS does not inform taxpayers about the PPIA (and likely violates taxpayers’ rights) because it would create too much work for them.
The TIGTA report confirms that the vast majority of taxpayers are either (a) negotiating directly with the IRS or (b) working with an inexperienced local accountant or attorney for tax resolution. Less than 2% of installment agreements are based on what the business or individual can afford to repay, even though the terms won’t repay the IRS in full. We think agreements should be based on what a taxpayer can afford. Additionally, taxpayers should know all their options (especially the options the IRS doesn’t want them to know about).