As a default rule, the Internal Revenue Service expects that taxpayers are to meet their tax obligations in full, whether immediately as they become due or if not, then over the life of an installment agreement, or payment plan. However, installment agreements are typically granted only where the tax debtor is financially capable of satisfying his tax obligations in full prior to the expiration of the Collection Statute Expiration Date (CSED). In cases where the tax debtor is paying the maximum monthly amount that is financially feasible, but still will not be able to satisfy the tax obligation within the CSED, then partial payment installment agreements must be considered.
Partial payment installment agreements and the IRS’ authority to grant them to tax debtors is a development of relatively recent vintage. The American Jobs Creation Act of 2004 amended IRC § 6159 to provide this authority. Internal Revenue Service, Internal Revenue Manual 18.104.22.168, Partial Payment Installment Agreements, available at https://www.irs.gov/irm/part5/irm_05-014-002r. Partial payment installment agreements essentially allow a tax debtor to pay his or her tax liability over a period of time to the extent he or she is able to do so.
That said, partial payment installment agreements are not granted simply on the basis of a request; rather, the IRS will review equity in the assets of the tax debtor as well as the tax debtor’s current and expected income in order to determine eligibility. That said, it is not always the case that the IRS will require a flat out liquidation of the tax debtor’s assets; there may be some instances where the tax debtor will be allowed to retain some of the equity in his or her assets while also approving a partial payment installment agreement. This will typically occur in situations where a levy, seizure or garnishment would not substantially impact the satisfaction of the outstanding tax obligation, i.e. where a levy or seizure is not appropriate. This is particularly important because the IRS will typically review a tax debtor’s file to determine whether levy or seizure is appropriate, and only after it is determined that such actions are not appropriate will the IRS then consider the granting of a partial payment installment agreement. An application requires a collection information statement, a statement of necessary expenses, and the tax debtor’s agreement to pay the maximum monthly payment based upon his or her ability to pay.
For answers to additional questions relating to partial payment installment agreements consult a licensed tax attorney.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.