Partial Pay Installment Agreement: IRS Guide & FAQs

Latest Facts and News

2025 Update: The IRS collected an average of $60 billion in unpaid taxes annually through enforcement actions.
Recent Changes: Enhanced digital application processes are now available for faster PPIA approvals
Current Statistics: PPIAs can reduce final tax payments by 60-80% of the original debt amount
New Development: The two-year financial review cycle continues to be standard practice for all active agreements.

Paying taxes can be hard, especially when the IRS keeps trying to collect even if you can’t pay everything. Maybe your paycheck barely covers rent and groceries, maybe your savings are gone, or maybe every time you think you’re catching up, another notice arrives.

The IRS doesn’t care about your stress; they only care about what they can still collect. That’s why programs like the partial pay installment agreement exist. This agreement is especially for people who can’t afford to pay the full amount.

Read along to see how this option works and what it could mean for you.

What is a Partial Payment Installment Agreement (PPIA)?

A partial pay installment agreement is a kind of IRS payment plan for people who owe taxes but can’t afford to pay the full amount. Instead of asking for everything, the IRS lets you pay a smaller amount each month based on what you can manage.

These payments go on for a while, and if there’s still some balance left when the IRS’s time to collect runs out, they just stop, and you don’t have to pay the rest.

PPIA vs. Standard Installment Agreements

A lot of people assume all IRS payment plans work the same way, but they don’t. The difference between a partial pay installment agreement and a regular one isn’t just about how much you pay; it’s also about how long you’re expected to pay and whether any part of the debt goes away.

Feature	Partial Pay Installment Agreement	Standard Installment Agreement
Total Amount Paid	Less than full debt	Full amount
Monthly Payment	Based on what you can afford	Based on the total balance owed
Debt Forgiveness	Yes, after the IRS collection window ends	No
Financial Reviews	Every 2 years	Usually not required
IRS Collection Window	Ends when CSED hits (usually 10 years)	Can go beyond if the balance isn’t paid
Best For	People with long-term financial hardship	People who can pay overtime but need flexibility

The main thing to remember is that PPIA gives you a chance to settle for less, but you’ll need to keep proving you still qualify. The standard plan is simpler, but it only works if you can eventually pay off everything you owe.

Partial Payment Installment Agreement Eligibility Requirements

If you are considering a partial payment installment plan, you must show the IRS that you cannot pay the full amount but are still trying your best to pay.

You must provide a full financial disclosure.

- That involves completing Form 433‑A for individuals (or Form 433‑B for corporations) and Form 9465 (installment agreement request) with your expenses, income, and all your assets detailed out.

Demonstrate you can’t repay the entire balance, even in the long term.

- The IRS would prefer that you suggest the highest amount you can pay each month. But it must be an amount that will not pay off the debt before the collection statute expires (CSED).

Your debt needs to be substantial enough to justify this.

- Typically, qualified PPIAs are taxpayers whose taxes, penalties, and interest range between $10,000 and more.

There are no qualifying assets or equity.

- If you have assets that you can sell or borrow against, the IRS may force you to use them before issuing the PPIA, except if they are worthless, not marketable, or selling them would get you into trouble.

You have to be tax-filing compliant.

- You must file all returns. If you are late in filing income taxes, the IRS may reject the agreement.

You may not already be in bankruptcy or have an Offer in Compromise outstanding.

- If either applies, you won’t qualify.

If you have failed to make payments under an IRS agreement in the past 24 months, the IRS can request direct debit or payroll deduction payments.

- They may still permit a PPIA, but under tighter conditions.

How to Apply for a Partial Pay Installment Agreement?

If you’re thinking about this plan, it’s important to know what the IRS expects from you and how the whole thing works once they review your case. Getting this part right makes the rest of the process easier to follow.

Step 1: Fill Out the Required Forms

To start, you’ll need to submit:

Form 9465 is the request for an IRS payment plan.
Form 433-A if you’re an individual, or Form 433-B if it’s a business.

These forms ask for details about your income, spending, debts, and any property or assets you own.

Step 2: Prepare Supporting Documents

Along with the forms, the IRS may ask for:

Recent pay stubs or proof of income
Bank statements
Mortgage or rent payment info
Utility bills
Any other documents that show your monthly expenses

Everything needs to match what you put in your forms. If anything looks off, it could delay or even hurt your chances.

Step 3: Submit Everything to the IRS

You can mail the forms to the IRS or sometimes submit them through a tax professional. The IRS doesn’t always accept these online. It depends on your situation.

Once they receive your paperwork, it usually takes about 30 to 60 days for them to review everything.

Step 4: The IRS Reviews Your Case

They’ll look at:

How much do you earn
What are your necessary living expenses (using their own standards)
What assets do you have
Whether any of those assets can be sold or used to pay off some debt

If they agree that you can’t afford to pay the full balance before the 10-year collection window ends, they’ll approve a partial pay installment agreement.

Step 5: You Make Monthly Payments

Once approved, the IRS tells you how much to pay each month. This amount is based on what’s left after your basic living costs, not on how much you owe in total.

You’ll keep making payments until the IRS’s collection window expires. This time limit is called the Collection Statute Expiration Date (CSED), and it’s usually 10 years from when your tax debt started.

Step 6: The Remaining Debt Is Forgiven

If you’ve made your payments and stayed compliant (like filing taxes on time), and the CSED runs out before the full debt is paid, the rest is forgiven. You don’t have to pay it anymore.

Step 7: The IRS Checks Every Two Years

Every two years, the IRS will ask for updated financial information. If they see that your situation has improved, they might increase your monthly payment. If not, things stay the same.

Calculating Your Monthly PPIA Payment Amount

This is what everyone else would like to know first: how much do I pay, monthly? The IRS doesn’t estimate. They use a method to calculate it, and it is based on how much you have left over after you pay for needs.

IRS National and Local Guidelines

When you request a partial pay installment agreement, the IRS does not test your actual expenses first. They start with what they think is reasonable for where you live. These are IRS allowable expenses, and they are divided into national and local standards.

These global standards cover sectors like food, apparel, health, and personal care items.
Local regulations influence housing, utilities, vehicle ownership, and public transport, and these vary based on where you live.

Let’s take an example. Let’s say you are a single person living in Texas.

The IRS can accept $3,300 a month for expenses (a hypothetical example).
Even if you are actually paying more than that, they might not take the extra unless you can demonstrate a legitimate reason and document it.

The trick is: you aren’t allowed to set your own budget. The IRS does have some figures they work with, and if your lifestyle is exceeding that, you’ll have to justify to them why.

Disposable Income Calculation

Once the IRS determines how much they will allow you to keep for expenses, they subtract that from your income. That which remains is your disposable income, and that is used to calculate your monthly PPIA payment.

Here’s a quick illustration:

You make $5,000/month
The IRS pays $3,300 a month in living expenses where you live.
That leaves $1,700/month disposable income

If you don’t have a valid reason, $1,700 will be your monthly payment in the partial pay installment agreement.

For individuals with variable income, such as freelancers or temporary workers, the IRS may determine an average income over several months or review recent tax returns to come up with a reasonable amount.

If your costs for things like medical care or child support are higher than average, you can try to include them, but you must keep detailed records.

This entire arrangement is what makes the PPIA appear to be strict. It also, however, allows you to settle for less if the figures evidently indicate that you can’t possibly pay the whole amount.

PPIA Terms, Conditions, and Compliance Requirements

Getting a partial pay installment agreement approved is one thing. Keeping it active is another. The IRS expects you to stick to a few rules after approval, and if you don’t, they can cancel the whole thing, sometimes without warning.

What do You Need to Keep Doing?

Make every payment on time: Even if it’s just $50 a month, missing a payment can break the agreement. The IRS takes that seriously.
File your tax returns every year: You have to stay current with all future taxes. If you skip a return, it can get flagged, and your agreement might be pulled.
Don’t build up new tax debt: If you owe again in the future, the IRS might not give you another chance. Keeping your taxes paid going forward is part of the deal.
Let the IRS take any refunds you’re owed: If you’re expecting a refund while your PPIA is active, the IRS can keep it and apply it to your balance. That’s standard, and you can’t opt out of it.

The Two-Year Review Can Change Things

Every two years, the IRS will ask you to update your financial information. This review is not optional.

If your income has gone up or expenses have gone down, they might raise your monthly payment.
If you ignore the review or don’t send what they ask for, they can cancel your agreement.

So it’s not a “set it and forget it” kind of plan. You’ll need to stay ready for updates.

What Happens If You Don’t Comply?

If you stop paying, don’t file your taxes, or ignore their review requests, here’s what can happen:

The IRS terminates your agreement
Collection actions can restart, like levies, liens, or wage garnishment
They may also refuse to offer another agreement in the future

In some cases, you might be able to reinstate the plan, but that depends on why it failed and how fast you respond.

Assets and Equity Considerations in PPIA Approval

It’s not just about what you earn. The IRS also looks closely at what you own. Even if you don’t have much cash, they’ll still check to see if you’ve got property, savings, or anything else that could be used to pay off part of your tax debt.

When Does the IRS Require Asset Liquidation?

If the IRS sees that you have something with value, like a second car, a rental property, or money sitting in savings, they may ask you to sell it or borrow against it before they approve a partial pay installment agreement.

Here’s what they look at most:

Home equity: If you own a house, they’ll check how much equity is available. If there’s enough to cover part of your debt, they may expect you to refinance or take out a loan.
Retirement accounts: Things like 401(k)s and IRAs are considered assets. Even though they’re for later, the IRS might still count them, unless you’re near retirement age or withdrawing would cause clear hardship.
Vehicles: If you have more than one, or if the car is worth much more than you need for daily use, it might be flagged.
Savings and investments: Money in a bank account, stocks, crypto, anything liquid or easily sold could be used to pay part of the tax bill.

They usually won’t ask you to sell tools for work, household basics, or things that can’t realistically be turned into cash.

Protecting Assets During PPIA Negotiations

If you have assets that technically have value but wouldn’t sell easily, or selling them would create more problems, you can explain that. The IRS does consider:

Unmarketable property: Land or property that would take too long to sell or has legal issues.
Spousal ownership: If an asset isn’t fully yours, like a jointly owned home, they may treat it differently.
Income-producing assets: If selling something would stop you from earning income (like a delivery car or tools), the IRS may let you keep it.

To protect your assets, everything comes down to how well you document your situation. You’ll need to prove why selling or borrowing isn’t a reasonable option.

Advantages and Disadvantages of Partial Pay Installment Agreements

All tax solutions have pros and cons. This one is not about quick fixes or paying your debt immediately. It is best if you know the key benefits and the aspects that may be more difficult down the line.

Economic Advantages of PPIA

You avoid coercive collection techniques: So long as the agreement is in effect, the IRS does not do things like withhold money from your wages or your bank account.
You retain your belongings (in most instances): You can qualify without liquidation and get to keep your belongings with minimal debt.
It saves you money as the clock ticks down towards the CSED: The longer you wait, the less you’ll owe, particularly if your income won’t rise substantially.
You can pay it off earlier if your financial situation improves: If your income increases, you can pay it off earlier without extra cost.

Potential Drawbacks and Limitations

You need to be absolutely sure of your financial situation: You will have to prove every two years that you remain unable to pay more. This involves collecting and presenting documents again and being prepared for payment increases.
Your refund is taken automatically: While the PPIA is active, any tax refund you are owed will be taken by the IRS and used to pay your debt. There are no exceptions.
The IRS can cancel it if you miss a step: One missed payment, one late return, or a skipped review, and the whole deal can fall apart. It’s not a set-it-and-forget-it agreement.
You still have a tax lien: Even after you pay, the IRS can still record a Notice of Federal Tax Lien. It won’t go away until you pay the debt in full or it is discharged.

PPIA vs. Other IRS Tax Resolution Options

A partial pay installment agreement isn’t the only way to deal with IRS debt. Depending on your financial situation, another option might work better or make more sense long term. Here’s how the main IRS-approved options compare side by side.

Option	What It Does	When It’s a Good Fit	Key Limitations
Partial Pay Installment Agreement (PPIA)	Lets you pay less than what you owe over time; remaining debt may be forgiven after the IRS’s 10-year collection period ends.	You can pay something monthly, but full repayment isn’t realistic.	Requires a full financial review; the IRS reviews the case every 2 years.
Installment Agreement (IA)	Let’s you pay the full tax debt in monthly installments.	You can pay the full amount, but you need more time.	Interest and penalties keep adding until everything is paid.
Offer in Compromise (OIC)	Lets you settle your debt for less than the full amount owed.	You qualify under strict IRS rules and can offer a lump sum or short-term payment.	Hard to qualify; low approval rate; must stay compliant for 5 years.
Currently Not Collectible (CNC)	Temporarily stops all IRS collection activity.	You can’t pay anything right now, not even small monthly payments.	Debt doesn’t go away; interest and penalties keep growing.
Penalty Relief	Removes or reduces IRS penalties for late filing/payment.	You had a valid reason for missing deadlines (first-time mistake, illness, etc.).	Only removes penalties, not the actual tax debt.
Innocent Spouse Relief	Removes responsibility for tax debt caused by a spouse on a joint return.	You didn’t know and didn’t benefit from the mistake your spouse made on a joint return.	Requires strong proof and sometimes a long review time.

Working with Tax Professionals for PPIA Success

Applying for a partial pay installment agreement is not as simple as filling out a form. The IRS meticulously examines your income, expenses, and assets before making a decision and continues to monitor your situation every two years for improvements. For many taxpayers, this process feels overwhelming.

That’s where professional guidance can make a real difference.

When to Hire a Tax Attorney or CPA?

There are times when trying to handle a PPIA on your own could cost more in the long run:

Complex finances: If you own a business, rental property, or have retirement accounts, the IRS may expect you to use these before approving a PPIA. An attorney-CPA can help present your case in a way that protects your essential assets.
International or expat issues: U.S. taxpayers living abroad face additional reporting and documentation hurdles. Anthony N. Verni regularly works with expatriates who need solutions that fit both U.S. and international tax rules.
Negotiation challenges: The IRS has strict standards for what counts as an allowable expense. A professional can justify exceptions, like medical bills or higher living costs in certain areas, so your monthly payment is fair.
Risk of default: If you’ve had tax problems before, the IRS may be less flexible. A tax attorney can guide you through compliance so your agreement isn’t pulled later.

Cost vs. Value of Professional Help

Some people hesitate to seek help because they worry about fees. But with the IRS, the way your financials are presented can decide whether you pay thousands more than you should or qualify for real relief.

Working with a dual-credential professional like Anthony N. Verni, Attorney and CPA, means you’re not only getting legal representation but also someone who understands the full financial picture. For taxpayers with significant IRS debt or expatriates dealing with U.S. tax rules from abroad, this balance of legal and accounting knowledge is rare and highly valuable.

Take the Next Step Today!

As we know, tax problems don’t fix themselves. The longer you wait, the harder and more costly it gets. Acting early keeps more options on the table and gives you back some control. If the IRS is already looking your way, the best step is not to wait; it’s to get a plan in place that works for you.

Reach out to Verni Tax Law today and start moving toward a real solution.

FAQs

How long does it take for the IRS to approve a partial payment installment agreement?

- The IRS typically responds within 30 days of receiving a complete PPIA application with all required documentation.

Can I modify my PPIA payment amount if my financial situation changes?

- Yes, you can request payment modifications during the required two-year financial reviews or if you experience significant hardship.

Will a partial payment installment agreement affect my credit score?

- The PPIA itself doesn’t directly impact credit scores, but existing tax liens will remain on credit reports until the debt is resolved.

What happens if I miss a PPIA payment?

- Missing payments can result in default and termination of your agreement, potentially triggering immediate collection actions.

Can I pay off my PPIA early without penalty?

- Yes, you can make additional payments or pay off the remaining balance early without penalties, though this eliminates the debt forgiveness benefit.