Tax Solution: Currently Not Collectible
Used When: You can pay off some, but not all, of your tax debt.
Partial pay installment agreements are very similar to an offer in compromise. Like the offer in compromise, they allow you to settle up your entire tax debt for less than you owe. It’s a bit different from the offer in compromise in execution.
With an offer in compromise, you specifically say to the IRS, “even though I owe you $50,000, I am instead offering to pay you $1,000”. So it’s a specific offer for a specific tax period.
With the partial pay installment agreement, the dynamics are different. With it, you’re saying “I owe you $50,000, but instead I am going to just pay $500 per month for the next 3 years, until I hit the expiration date for when you’re allowed to collect the tax”. (The IRS usually has 10 years to collect taxes after it assesses them against you).
Unfortunately, like the offer in compromise, the partial pay installment agreement requires a deep-dive into your financial background! The IRS will request a fully-disclosed financial statement that outlines all of your assets, your income, and your expenses.
And they’re going to check to see if your expenses “line up” with their expectations of how much you should be spending (and unsurprisingly, their expectations for your budget are a lot tighter than most of us would like to live!).
A partial pay installment agreement is obviously a highly-desired resolution for taxpayers, but getting them is complex! A strict and thorough analysis of all of your financial information is in order before coming to the conclusion that you should pursue this type of resolution.