Overview

A Partial Payment Installment Agreement (PPIA) is an option the IRS can grant when a taxpayer can’t pay the full tax bill but can afford a smaller monthly payment based on verified finances. PPIAs are not automatic; the IRS evaluates your income, assets, necessary living expenses, and liabilities and decides whether continued partial payments are appropriate. For official guidance see the IRS installment agreement pages (IRS.gov/installment-agreements) and the Collection Information Statement guidance (IRS.gov – Collection Information Statements).

In my practice as a CPA and CFP®, I’ve seen PPIAs provide practical breathing room for people who otherwise face liens, levies, or enforced collection. However, they require discipline: tax penalties and interest typically continue, the agreement often requires periodic financial reviews, and the IRS can resume collections if circumstances change.

Who should consider a PPIA?

  • Taxpayers who cannot pay their full liability but can make regular payments.
  • Individuals and businesses with documented, ongoing financial hardship.
  • Taxpayers for whom an Offer in Compromise (OIC) is not appropriate or likely — PPIAs can be an alternative while you evaluate longer-term solutions.

If you’re unsure whether a PPIA or an OIC is right for you, see our comparison: Installment Agreements vs. Offers in Compromise: Which is Right for You? (https://finhelp.io/glossary/installment-agreements-vs-offers-in-compromise-which-is-right-for-you/).

Key facts to know

  • Application requires a Collection Information Statement (Form 433-F; some taxpayers use Forms 433-A or 433-B depending on entity type). The IRS uses this to verify income, expenses, assets, and liabilities (see IRS collection statements guidance).
  • Interest and most penalties continue to accrue on the unpaid balance unless specifically abated.
  • The IRS may periodically review your finances (often every 1–2 years) to determine whether payments should increase.
  • The IRS can file a Notice of Federal Tax Lien or continue other collection actions if the terms are not met.
  • The IRS generally can collect until the Collection Statute Expiration Date (CSED), which is typically 10 years from the date of assessment (see IRS – Collection Statute Expiration Date).

How the PPIA process works — step by step

  1. Collect documentation
  • Recent pay stubs, bank statements, proof of fixed expenses (rent/mortgage, utilities), asset statements (vehicles, real estate), and documentation of debts.
  • Copies of the last several filed tax returns and any notices from the IRS.
  1. Complete the right forms
  • Primary: Form 433-F (Collection Information Statement) for most PPIA requests; some taxpayers may use Form 433-A or 433-B depending on business structure and IRS instructions.
  • Request an installment agreement using Form 9465 or by contacting the IRS Collection department. In many cases a revenue officer will request the Collection Information Statement as part of the PPIA process (IRS guidance).
  1. Calculate a defensible monthly payment
  • Build a conservative budget based on necessary living expenses and IRS Collection Financial Standards.
  • The monthly payment should be sustainable; the IRS will expect you to maintain that payment for the term of the agreement unless your finances change.
  1. Submit the package and negotiate
  • Send the completed forms and documentation to the IRS office handling your case or submit online if eligible.
  • An assigned revenue officer may propose a monthly payment. Be prepared to explain variable income, seasonal work, or temporary hardships.
  1. Accept terms and set up payments
  • Direct debit (DDIA), payroll deduction, or electronic payments reduce the chance of missed payments and are often recommended.
  • Ensure you have confirmation in writing of the agreed terms and payment schedule.
  1. Maintain compliance
  • File all future tax returns on time and pay current taxes as they come due. Failure to do so is a common cause of PPIA default.
  • Notify the IRS proactively if your financial situation improves or worsens; you may be required to provide updated financial statements.
  1. Review, modify, or terminate
  • If income rises, the IRS may increase required payments during periodic reviews.
  • If you default, the IRS can terminate the agreement and resume enforced collection (levies, seizures).

Practical examples (illustrative)

  • Example 1: A taxpayer with irregular wages owes $30,000 and has monthly allowable living expenses that leave only $200 monthly for tax payments. After submitting Form 433-F, the IRS agrees to a PPIA at $200/month with periodic reviews every 12–24 months. Interest continues to accrue, but the taxpayer avoids immediate levy actions while making consistent payments.

  • Example 2: A self-employed taxpayer’s cash flow improves mid-agreement. The IRS requests updated financials; higher payments are required based on increased disposable income. If the taxpayer cannot make the higher payments, they must request a modification promptly.

(These examples are simplified and for educational purposes.)

Common mistakes and how to avoid them

  • Missing or incomplete documentation: Always send current bank statements and proof for claimed expenses.
  • Failing to stay current on new tax returns: File and pay current-year taxes on time; otherwise your PPIA can be revoked.
  • Choosing a payment method that’s easy to miss: Use direct debit when possible to minimize missed payments.
  • Not planning for interest and penalties: Remember that tax interest compounds; paying as much as possible early reduces long-term cost.

When to consider alternatives

Negotiation and documentation tips from practice

  • Be transparent and complete: Revenue officers prefer clearly documented, reasonable budgets. In my 15+ years of practice I’ve seen transparent, organized submissions get approved faster.
  • Use national and local standards where appropriate: The IRS uses Collection Financial Standards to evaluate living expenses; use those to explain necessary costs.
  • Request a written decision: Always ask for written confirmation of the PPIA terms, payment amounts, due dates, and review schedule.
  • Keep copies: Maintain a file with every form, letter, and bank transaction related to the agreement.

What happens if you default?

Default can lead to termination of the PPIA and immediate collection actions: tax levies on bank accounts, wage garnishment, or seizure of assets. The IRS may also file or perfect a Notice of Federal Tax Lien. If you default, call the IRS or your tax professional immediately to negotiate reinstatement or modification.

Cost considerations

  • Interest and penalties typically continue to accrue on the unpaid balance, increasing total cost over time.
  • Some taxpayers pay for professional representation (CPAs, enrolled agents) to negotiate with the IRS. Professional fees should be weighed against potential savings from a well-structured agreement.

Final checklist before you apply

  • Gather pay stubs, bank and asset statements, copies of recent tax returns, and a living expense budget.
  • Complete Form 433-F (or the applicable Collection Information Statement) and Form 9465 or follow instructions from your IRS revenue officer.
  • Decide on a payment method (direct debit recommended) and prepare for periodic reviews.
  • Compare alternatives (OIC, bankruptcy) and consult a tax professional if necessary.

Where to get official help and more information

Professional disclaimer: This article is educational and does not replace personalized tax advice. Tax rules change and individual circumstances vary; consult a qualified tax professional or attorney before signing any agreement with the IRS.

Author note: With over 15 years working with taxpayers on collection issues, I’ve found that the most successful PPIA outcomes come from full documentation, conservative budgeting, and proactive communication with the IRS.