How to Negotiate a Partial Payment Installment Agreement

How Can You Successfully Negotiate a Partial Payment Installment Agreement with the IRS?

A Partial Payment Installment Agreement (PPIA) can be the right option when you owe taxes but cannot afford a standard installment agreement or full payment. In my 15+ years helping clients with IRS collections, success usually comes from thorough documentation, realistic payment calculations, and predictable communication with the IRS. Below I explain the process, required forms, negotiation strategy, documentation checklist, common mistakes, and when to bring in a tax professional.

What a PPIA is and when it’s appropriate

• A PPIA lets the IRS accept payments that are less than the full balance due while the debt remains outstanding and interest and penalties continue to accrue. It is for taxpayers who cannot reasonably pay a full installment plan and are not eligible for—or do not want—other collection alternatives like an Offer in Compromise.
• The IRS evaluates a PPIA using a financial statement (commonly Form 433-F or a similar collection statement) to determine a taxpayer’s monthly disposable income and ability to pay. (See IRS guidance on Form 433-F: https://www.irs.gov/forms-pubs/about-form-433-f.)
• A PPIA is not forgiveness; it’s a collection arrangement. The IRS can review, modify, or terminate the agreement if your financial picture changes or if you provide false information.

Authoritative references: IRS payment options and Form 433-F guidance (IRS.gov), and collection alternatives guidance (IRS Collections) (https://www.irs.gov/payments, https://www.irs.gov/forms-pubs/about-form-433-f).

Step-by-step negotiation process

1. Prepare a complete financial packet

• Complete Form 433-F (Collection Information Statement) or Form 433-A/B where appropriate. Include recent pay stubs, bank statements (3 months), proof of recurring bills (lease/mortgage, utilities, insurance), and statements for irregular but recurring expenses (childcare, medical).
• If you have assets (vehicle equity, retirement accounts), document them; the IRS will consider whether assets could be sold or borrowed against.
• Internal tip from my practice: organize documents in a single folder and provide a one-page summary of monthly income and expenses to the IRS agent.

1. Calculate a realistic monthly offer

• Start with your disposable income after allowable living expenses under IRS Standards. Use conservative figures so you do not overpromise. If approved, failing to make payments risks default.
• Keep in mind that interest and penalties typically continue to accrue until the tax is fully paid, so the total amount owed will grow unless otherwise abated.

1. Contact the IRS Collections office handling your case

• You’ll typically be contacted by a Revenue Officer or Collections representative. Be responsive—return calls and mail promptly.
• Offer the PPIA proposal in writing and attach the supporting financial packet. If speaking on the phone, follow up with a formal submission.

1. Expect a review period and possible counteroffers

• The IRS may counter with different monthly amounts or request additional documentation. Negotiate within the bounds of your documented ability to pay; be factual and firm about unavoidable expenses.

1. Get the agreement in writing

• If the IRS approves a PPIA, get written confirmation of the terms: monthly payment, review intervals, whether liens remain, and how long payments will be accepted. Save all correspondence.

Documentation checklist

• Completed Form 433-F (or the version the IRS requests) with all sections filled.
• Three months of bank statements and recent pay stubs or profit/loss statements for self-employed taxpayers.
• Copies of bills for mortgage/rent, utilities, insurance, auto loans, medical expenses, and childcare.
• A one-page summary of monthly income, mandatory expenses, and proposed payment amount.
• Evidence of extraordinary circumstances (job loss, medical bills) if applicable.

For help completing financial statements, see our step-by-step guide to Form 433-F: How to Use Form 433-F to Negotiate an Installment Agreement.

Negotiation tactics that work (practical tips)

• Be honest and precise. The IRS verifies statements. Incomplete or inflated expenses reduce credibility and can result in denial.
• Lead with facts, not emotion. Explain any recent income shocks (layoff, emergency medical expense) and show supporting documents.
• Offer a firm, sustainable monthly number. In negotiation I prefer proposing a slightly lower amount than the maximum you could afford; this gives room for a counteroffer and reduces default risk.
• If you expect income to rebound (seasonal work), propose a review period or a graduated plan tied to documented income changes.
• Use direct debit where possible. While a Direct Debit Installment Agreement is different from a PPIA, demonstrating a willingness to set up reliable payment methods can improve the IRS’s confidence in your proposal. Learn more about automatic payments: Direct Debit Installment Agreement (DDIA).

How the IRS evaluates and common reasons for denial

• The IRS evaluates whether the payment offered is the maximum the taxpayer can reasonably pay based on verified expenses and asset liquidation potential.
• Common denial reasons: incomplete documentation, unrealistic expenses, undisclosed assets, or a payment proposal that exceeds disposable income.
• If denied, you can ask the IRS to explain the decision in writing and ask about options: re-submission with better documentation, a standard installment agreement, or referral to CNC or Offer in Compromise if appropriate.

For an overview of setting up or managing a PPIA once approved, see: How to Set Up and Manage Partial Payment Installment Agreements.

Common mistakes and how to avoid them

• Under-documenting: Submit complete bank statements and proof of recurring obligations.
• Overpromising: Setting a payment you cannot maintain leads to default and removal of lenient collection options.
• Ignoring continuing interest/penalties: Explain to clients that PPIAs do not stop interest—only reduce monthly burden.
• Waiting too long: Early engagement with the IRS increases options and goodwill.

Timeline and review

• Expect an initial processing and review period that may take several weeks to months depending on IRS workload and case complexity.
• Many PPIAs include periodic reviews. If your financial condition improves, the IRS may require higher payments; if it worsens, you can ask for modification.

When to hire an enrolled agent, CPA, or tax attorney

• Hire a professional when: the balance is large and complex (multiple years), the IRS is levying wages or bank accounts, or you face potential criminal exposure for tax fraud. A competent practitioner improves documentation quality and negotiation outcomes.

Professional insight: In my practice I’ve seen clearer, organized financial packets materially increase approval rates. A preparer can also represent you during appeals or when negotiating with a Revenue Officer.

Sample items to include in a cover letter to the IRS

• Case/CP notice number and taxpayer name/SSN.
• One-sentence summary of the financial hardship and the requested PPIA monthly amount.
• Bullet list of enclosed documents (Form 433-F, bank statements, pay stubs, bills).
• Contact phone number and statement offering to provide additional records.

Quick checklist before submitting your PPIA request

• [ ] Form 433-F completed and signed
• [ ] 3 months of bank statements
• [ ] Recent pay stubs or profit/loss statements
• [ ] Documents for major recurring bills
• [ ] Proposed monthly payment and explanation
• [ ] Copy of prior year tax return (if requested)

Frequently asked questions (brief)

• Will interest stop? No. Interest and penalties generally continue to accrue until the full balance is paid. (IRS.gov)
• Can the IRS file or keep a lien? Yes. The IRS may place or continue a federal tax lien; confirm lien status in your written agreement.
• Can you later convert to another option? Yes — if circumstances change you can ask the IRS to modify or convert arrangements, or pursue an Offer in Compromise if eligible.

Sources and further reading

• IRS — About Form 433-F (Collection Information Statement): https://www.irs.gov/forms-pubs/about-form-433-f
• IRS — Online Payment Agreement Application and payment options: https://www.irs.gov/payments
• IRS — Collection Alternatives guidance (Collections Manual & policy): https://www.irs.gov/
• Consumer Financial Protection Bureau (general consumer debt guidance): https://www.consumerfinance.gov/

Professional disclaimer: This article is educational and not individualized tax advice. Laws and IRS procedures can change; consult a qualified tax advisor, CPA, enrolled agent, or tax attorney for guidance specific to your situation.

If you want a printable checklist or sample Form 433-F cover letter template, our guide on completing the form explains what to include and how to organize your submission: How to Use Form 433-F to Negotiate an Installment Agreement.