In an earlier video, I talked about the three types of installment agreements that a taxpayer can make with the IRS. In this video, we’re going to talk in more detail about the partial payment installment agreement.

Sometimes the partial payment installment agreement is an amazing deal even better than any offer and compromise but your facts have to fit it just right. So let me explain.

Typically, there’s a 10 year statute of limitations for the collection of income tax in an IRS case. Here’s what that means in English. If a taxpayer files a tax return with a balance due, there’s 10 years for the IRS to collect that tax with certain exceptions. Otherwise, the tax liability actually expires.

In a case where someone has a high tax liability and a low number of months left on the collection statute, the IRS will allow them to enter into a partial pay installment agreement.

Let me give you an example, let’s say you come into my office and you have 18 months let on the collection statute but you owe $100,000 but you’re a low income taxpayer and for whatever reason you don’t want to entertain an offer and compromise.

You don’t quite qualify for hardship status, meaning you have some monthly disposable income at the end of the day but you want to go ahead and enter into a partial pay installment agreement.

If you had $100 a month, for example for this scenario, of monthly disposable income and 18 months left on the collection statute, you would make those payments in equal monthly installments of $100 per month and you would end up paying a grand total of $1,800 on a $100,000 liability.

Is that far fetched? No, it actually is quite frequently the case. It doesn’t happen all the time, but it happens quite frequently with clients in our office.

What you need is an IRS Lawyer to go ahead and look at your case, determine how much time is left on the collection statute, and help you determine the best collection alternative to help you achieve your goals of dealing with your IRS problem.

partial payment installment agreement

There’s one interesting thing about this partial pay installment agreement however, if you have assets that you could liquidate, you could be forced to liquidate. The IRS will not let you enter into a partial pay installment agreement.

What does that mean? Well, let’s say you have $5,000 equity in your car, the IRS is actually going to insist that you pay that $5,000 equity in the car plus $100 a month monthly payment for that 18 months before they agree to that partial pay installment agreement.

You see in that scenario, that probably wouldn’t work out because you still need your car for work, medical care, school, that kind of thing.

If you have questions about a partial payment installment agreement or really anything else that has to do with IRS problem resolution, I invite you to give us a call at 888-438-6474.