Background and purpose

A Partial-Payment Installment Agreement (PPIA) exists for taxpayers who cannot pay their full tax liability now or before the IRS’s collection statute expires. The IRS uses PPIAs to collect what it reasonably can over time while avoiding undue hardship. In practice, the IRS requires full financial disclosure (Collection Information Statement) and will review the plan periodically. (See IRS: Payment Plans and Understanding Installment Agreements: https://www.irs.gov/individuals/payment-plans-installment-agreements and https://www.irs.gov/businesses/small-businesses-self-employed/understanding-installment-agreements.)

How it works — step-by-step

  1. Gather documentation: recent pay stubs, bank statements, monthly bills, and completed Collection Information Statement (Form 433-F or 433-A for individuals/businesses) and Form 9465 if requesting an installment agreement online or by mail.
  2. Calculate a realistic monthly offer based on your budget and allowable IRS living expenses. The IRS compares your offer to its National and Local Standards and will accept what it reasonably expects to collect before the Collection Statute Expiration Date (CSED).
  3. Submit the proposal: online (when eligible), by phone through the IRS Collection division, or by mail with required forms. The IRS will evaluate and either accept, counter, or request more information.
  4. Make timely payments: interest and penalties continue to accrue on unpaid tax, and missed payments can default the agreement.
  5. Periodic review: the IRS may request updated financials to confirm the installment amount remains accurate. If you improve financially, the IRS may seek higher payments.

Note: Not everyone qualifies for online setup—partial-payment proposals usually require manual review.

Real-world example

In my practice I worked with a sole proprietor who owed $30,000 after a slow year. Their verified monthly surplus allowed only $300 a month toward taxes. We prepared Form 433-F, submitted a PPIA proposal, and the IRS accepted a monthly payment that kept the account in active collection while they rebuilt revenue. Interest and penalties continued but they avoided enforced collection actions.

Who is eligible and who is affected

  • Eligible: Individuals and small business owners who cannot fully pay and whose financials show limited disposable income. You must be current with tax filings and not under certain levies or bankruptcy restrictions.
  • Affected: Taxpayers who need cash flow relief but can make recurring payments; those with improving income should expect adjustments.

Key documents and IRS references

  • Form 433-F or Form 433-A (Collection Information Statement) — required for a thorough PPIA evaluation.
  • Form 9465 — Installment Agreement Request (often included with proposals).
  • IRS guidance on payment plans and installment agreements (see links above).

Practical strategies to design a workable PPIA

  • Be realistic and conservative when budgeting: list fixed and variable expenses and use IRS National Standards for housing and living expenses as a cross-check.
  • Start with a defensible number: offer what your verified budget supports, not what you wish to pay.
  • Keep all tax returns current and file timely each year—unfiled returns disqualify many arrangements.
  • Automate payments (direct debit) to reduce default risk and often lower setup fees.
  • Prepare to document any material change in finances; be proactive in requesting modification when income drops or rises.

For more on preparing a realistic budget and documenting changes, see our guides: “Preparing a Realistic Budget for an IRS Installment Proposal” (https://finhelp.io/glossary/preparing-a-realistic-budget-for-an-irs-installment-proposal/) and “How the IRS Evaluates Financial Information for Installment Plans” (https://finhelp.io/glossary/how-the-irs-evaluates-financial-information-for-installment-plans/).

Common mistakes and misconceptions

  • Mistake: Offering payments based on desire rather than documented ability. The IRS relies on documented cash flow.
  • Mistake: Assuming interest and penalties stop—these continue to accrue on unpaid balances.
  • Misconception: A PPIA forgives the remainder. The unpaid balance may remain uncollected only until the CSED; it is not forgiven unless later approved through an Offer in Compromise.

Frequently asked questions

  • How do I apply? Generally by submitting Form 433-F or 433-A with income/expense documentation and Form 9465 if requesting installment terms. For a step-by-step walkthrough, see our guide: “How to Apply for a Partial-Payment Installment Agreement: A Step-by-Step Guide” (https://finhelp.io/glossary/how-to-apply-for-a-partial-payment-installment-agreement-a-step-by-step-guide/).
  • Can I change my payment amount? Yes—if your financial situation changes, you can request a modification; be ready to provide updated documentation.
  • Will the IRS file a lien? The IRS may file a Notice of Federal Tax Lien to protect its interest; you can negotiate release or subordination in limited circumstances.

Practical checklist before you submit

  • File all required tax returns
  • Gather pay stubs, bank statements, and expense receipts
  • Complete Form 433-F/433-A and Form 9465 as appropriate
  • Draft a monthly budget showing the proposed payment
  • Decide on automatic debit to reduce default risk

Professional insight

In my 15+ years advising taxpayers I’ve found that a PPIA succeeds when the taxpayer provides complete, verifiable documentation and proposes a monthly payment that matches real disposable income. Lenders and business partners respect proactive arrangements; the IRS responds better to organized proposals than to late, piecemeal offers.

Risks and what to watch for

  • Interest and penalties continue
  • Agreements can be reviewed and adjusted
  • Missed payments lead to default and possible enforced collection
  • Partial agreements don’t eliminate the need to monitor the CSED

Alternatives to consider

If a PPIA won’t work, consider a streamlined installment agreement (if eligible), currently not collectible status, or an Offer in Compromise. Compare options in our overview: “Options for Resolving Tax Debt: Installment Agreements, Offers in Compromise, and CNC” (https://finhelp.io/glossary/options-for-resolving-tax-debt-installment-agreements-offers-in-compromise-and-cnc/).

Professional disclaimer

This content is educational and does not substitute for individualized tax advice. Consult a CPA, enrolled agent, or tax attorney for a plan tailored to your situation.

Authoritative sources

(Information current as of 2025.)