Quick overview

A Partial-Payment Installment Agreement (PPIA) is an option when you owe the IRS but can’t reasonably pay the full amount. Unlike a full installment agreement, a PPIA accepts monthly payments that don’t completely retire the liability; the unpaid balance may remain when the agreement ends. The IRS evaluates PPIAs using documented financials and typically ties payments to your Collection Statute Expiration Date (CSED). (IRS: “Installment Agreements”, https://www.irs.gov/payments/installment-agreements)

How a PPIA works

  • You submit a Collection Information Statement (Form 433-F or Form 433-A, depending on circumstances) and supporting documents so the IRS can calculate reasonable monthly payments.
  • The IRS sets a monthly amount based on your allowable living expenses and disposable income. Payments often continue until the CSED (generally 10 years from assessment) unless the IRS revises the plan.
  • Interest and penalties generally continue to accrue on the unpaid balance; the IRS may file or keep a lien.

(See IRS guidance on collection options: https://www.irs.gov/businesses/small-businesses-self-employed/collection-information)

Who is eligible and when it’s appropriate

A PPIA is appropriate if:

  • You cannot pay the full tax now or on an affordable monthly schedule, and
  • Your verified income, assets and allowable expenses show you cannot fully satisfy the debt before the CSED, and
  • You remain current on all future tax filings and payments.

PPIAs are fact-specific. The IRS evaluates the entirety of your finances rather than applying a single numerical cut-off. If you have non‑exempt equity in assets or discretionary income, the IRS may require larger payments or pursue collection.

When to consider a PPIA instead of other options

Consider a PPIA when:

  • You can make regular monthly payments but lack funds to pay in full or qualify for a shorter plan.
  • You don’t qualify for an Offer in Compromise (OIC) or OIC processing would take longer than acceptable (see IRS Offer in Compromise: https://www.irs.gov/payments/offer-in-compromise).
  • You want to stop immediate enforced collection (levy/garnishment) while making reasonable payments.

If your financial picture improves, you can request a modification, or the IRS may recalculate payments. In some cases an OIC or bankruptcy may be a better path—consult a tax professional.

Step-by-step: How to apply

  1. Gather documentation: recent pay stubs, bank statements, proof of necessary living expenses, and completed Form 433-F or Form 433-A as required.
  2. Determine whether you should apply online, by phone, or through the collection office handling your case. Smaller, streamlined agreements may be set up online; PPIAs usually require more documentation. (FinHelp: “Setting Up an IRS Installment Agreement Online: A Practical Walkthrough”, https://finhelp.io/glossary/setting-up-an-irs-installment-agreement-online-a-practical-walkthrough/)
  3. Submit your financial statement and proposed monthly payment to the IRS; respond promptly if the IRS requests more information.
  4. If accepted, keep records, make payments on time, and file future tax returns on time. If circumstances change, request a recalculation or modification. (FinHelp: “How to Prepare a Financial Statement for Installment Agreement Applications”, https://finhelp.io/glossary/how-to-prepare-a-financial-statement-for-installment-agreement-applications/)

Costs, consequences and what to expect

  • Interest and penalties continue on unpaid balances; interest rates are set by the IRS and change periodically.
  • A tax lien may be filed or kept in place while the agreement is active.
  • Missing payments can lead to default and immediate collection actions.

Common mistakes to avoid

  • Assuming a PPIA erases the debt: it usually does not.
  • Under‑documenting expenses or overstating hardship—this can delay or deny approval.
  • Falling behind on post‑agreement tax filings, which can void the arrangement.

Short examples (real-world context)

  • Temporary hardship: An unemployed taxpayer with little nonexempt equity could negotiate a lower monthly payment to avoid immediate levy while they find work. In my practice I’ve found this stabilizes cash flow and prevents escalated collection while the taxpayer recovers.
  • Business cash‑flow issue: A small business owner with seasonal income may set a PPIA to preserve working capital while making agreed payments.

Professional tips

When to get professional help

If your situation is complex—significant assets, business ownership, or contested liability—consult a tax attorney, enrolled agent, or CPA. In my 15+ years advising clients, coordinated representation speeds negotiations and reduces mistakes.

Disclaimer

This article is educational and not individualized tax advice. Rules change and cases vary; consult a qualified tax professional or the IRS for guidance tailored to your situation.

Authoritative sources