Why choose this option?

A PPIA can be the best choice when you cannot pay your tax balance in full and your disposable income and assets won’t cover the liability before the IRS’s Collection Statute Expiration Date (CSED). Unlike a standard installment agreement that expects full repayment over time, a PPIA accepts lower monthly payments tied to your documented ability to pay. Interest and penalties continue to accrue, and the unpaid balance may remain at the end of the collection period.

How a PPIA works — step by step

  1. Document your finances: The IRS requires a complete picture of income, living expenses and assets. That usually means submitting a financial statement (Form 433-F or Form 433-A) and supporting documents. (See guidance on IRS collection financial standards: https://www.irs.gov/collections/collection-financial-standards.)
  2. Request the arrangement: You can begin with Form 9465 (Installment Agreement Request) but be prepared to provide the detailed financial statement the IRS needs to evaluate a partial-pay offer. The IRS evaluates proposals against your “reasonable collection potential.” (IRS installment agreement overview: https://www.irs.gov/payments/installment-agreements.)
  3. IRS review and offer: The IRS calculates a monthly payment equal to what it believes can be collected before the CSED. If your proposed payment matches their calculation, they may accept the PPIA.
  4. Ongoing reviews: The IRS can ask for updated finances; payments may be adjusted. If your income increases, the IRS can reopen the account and demand higher payments.

Who should consider a PPIA?

  • Taxpayers whose disposable income is too low to fully repay the liability before CSED.
  • Individuals or small-business owners with exempt or illiquid assets (for example, retirement accounts) that reduce available collection options.
  • People who need to avoid immediate enforced collection (levies) and who can make a reliable monthly payment.

Pros and cons

Pros

  • Stops aggressive collection actions in many cases while payments are current.
  • Allows manageable monthly payments based on actual ability to pay.
  • Can be simpler and faster than submitting an Offer in Compromise.

Cons

  • Interest and penalties continue to accrue on the unpaid balance.
  • Unpaid balance may survive beyond the agreement if not collectible by the CSED.
  • The IRS may file or keep liens; a PPIA does not automatically remove liens.
  • Periodic financial reviews can lead to payment increases or default.

Key rules and risks to watch

  • Collection Statute Expiration Date (CSED): PPIAs are often used when full collection is unlikely before CSED. Know your CSED — it limits how long the IRS can collect a tax debt.
  • Continuing accrual: Penalties and interest are not forgiven; they keep adding to the balance.
  • Compliance required: You must file returns and pay current taxes on time to keep the agreement in force.
  • Possible default triggers: missed payments, failure to file, or undisclosed assets can terminate the agreement and reopen enforcement.

Documentation checklist

  • Copy of most recent tax return(s).
  • Proof of income (paystubs, business income statements).
  • List of monthly living expenses and supporting bills.
  • Statements for bank, retirement, and other assets.
  • Completed Form 433-F or 433-A and, if requested, Form 9465.

Practical tips from practice

  • Be honest and thorough: incomplete or inconsistent financial statements often delay approval or trigger collection actions.
  • Start with a realistic monthly offer tied to documented expenses—lowball offers are rejected.
  • If your income improves, proactively contact the IRS to modify the plan; that avoids surprise default notices.
  • Compare options: sometimes an Offer in Compromise or a secured loan is better. See our comparison: Offer in Compromise vs Partial Payment Installment Agreements.

Related resources on FinHelp

Short example

A single taxpayer owes $15,000 but has monthly disposable income of $300 and no collectible assets. The IRS may accept a PPIA requiring $300/month if that payment equals the reasonable collection potential before the CSED. The unpaid balance would remain collectible until CSED but the taxpayer avoids immediate enforced collection while paying.

Frequently asked (brief)

  • Can the IRS accept a PPIA online? Some installment requests start online, but PPIAs generally require paper financial statements and additional review by IRS collection staff. (See IRS installment agreement page.)
  • Does a PPIA stop a tax lien? Not automatically; liens may remain in place until the tax is fully satisfied or otherwise released.

Professional disclaimer

This article is educational and not individualized tax or legal advice. For guidance tailored to your situation, consult a qualified tax professional or the Taxpayer Advocate Service. See IRS Installment Agreements: https://www.irs.gov/payments/installment-agreements.

Authoritative sources