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When you are responsible for the failure to remit trust fund taxes of your business, you might incur a trust fund recovery penalty (TFRP). But what happens if you cannot pay that penalty immediately? Our Washington DC attorney could explain how you might qualify for a partial payment installment agreement to satisfy your TFRP.
A partial payment installment agreement (PPIA) is the agreement between the IRS and a taxpayer where their debt is paid off in installments less than the total amount due, over the 10-year collection statute of limitations. This is slightly different than a typical installment agreement, where you would pay the full amount. Anyone who owes money to the IRS can apply for an installment agreement or a partial payment agreement, although they are not guaranteed to receive one.
An individual or business that has submitted an offer in compromise and was rejected is eligible to request a partial payment installment agreement to cover the trust fund recovery penalty.
To request the partial payment installment agreement for a TFRP, you will need to file it with IRS Form 433A. This option is only available for a taxpayer who cannot fully pay the taxes over the statute of limitations and they must continue to file their tax returns fully paid and on time, with partial payment installments. The installment agreement is requested by the taxpayer on Form 433, but ultimately, the IRS has the approval authority.
It is highly likely the IRS revisits the financial situation of the taxpayer every two years, and request another Form 433A to see if their assets and monthly net income has changed, with the goal of requiring a larger monthly payment and potentially a full pay agreement.
The IRS may reject a PPIA for a trust fund recovery penalty when, based on the financial situation of the liable taxpayer, it seems they can fully pay the TFRP upfront. A business can appeal an installment agreement rejection to the Office of Appeals, though the request must be made within 30 days of rejection.
If a partial payment agreement is accepted, the taxpayer must focus on making their monthly payments on time and in the full amount, and must also participate in the financial review every two years to determine if their financial situation has changed.
A tax lawyer could help you obtain a partial pay installment agreement through the preparation of a Form 433A to ensure it is properly and accurately filled out. We also take an active role in confirming the agreement with the IRS that the amount due every month is manageable.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Fairfax, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.
