The IRS implemented an additional payment option, on January 17, 2005, known as the Partial Payment Installment Agreement (PPIA) for taxpayers who have outstanding federal tax liabilities. This new payment option became possible with the passage of the American Jobs Creation Act of 2004 signed into law on October 22, 2004. The new legislation includes language amending Internal Revenue Code 6159 to allow the IRS to enter into installment agreements that result in full or partial payment of the tax liability.
Prior to enactment of this legislation, taxpayers that could not fully pay their outstanding tax liabilities could only enter into an agreement with the IRS if it resulted in full payment of the liability. This left taxpayers unable to meet this criterion with limited payment options.
Taxpayers who request a PPIA must provide complete and accurate financial information that will be reviewed and verified. Taxpayers will also be required to address equity in assets that can be utilized to reduce or fully pay the amount of the outstanding liability.
In addition, taxpayers granted PPIAs will be subject to a subsequent financial review every two years. As a result of this review, the amount of the installment payments could increase or the agreement could be terminated, if the taxpayer’s financial condition improves.
The PPIA payment option will provide an appropriate payment option for many taxpayers. Those who qualify for the PPIA option will be strongly encouraged to make their payments via the direct debit option.