Partial Pay Installment Agreement
A Partial Payment Installment Agreement (PPIA) is a payment arrangement with the IRS that allows you to make regular monthly payments based on your financial ability, rather than the total amount you owe. Under a PPIA, you will not fully pay off your tax liability before the IRS collection period (the statute of limitations) expires.
Depending on your financial circumstances, your monthly payment under a Partial Payment Installment Agreement (PPIA) can be as low as $25. In some cases, you may end up paying significantly less than your total tax liability—similar to the outcome of an Offer in Compromise (OIC). A PPIA can provide substantial savings, especially if the Collection Statute Expiration Date (CSED) is approaching. It essentially serves as a practical alternative to an OIC when you're not eligible for one—for example, if your projected future income disqualifies you from an offer.
The IRS has 10 years from the date of assessment of a tax liability to collect the tax liability, which is called Collection statute expiration date (CSED).
A Partial Payment Installment Agreement (PPIA) may be granted to both individual and business taxpayers. However, because the agreement does not fully satisfy the tax liability, the IRS will typically assess the Trust Fund Recovery Penalty (TFRP) against the responsible individuals in applicable business cases. Additionally, the IRS may request an extension of the Assessment Statute Expiration Date (ASED) to preserve its ability to assess the TFRP within the required timeframe.
PPIA’s Benefits
Affordable Monthly Payments: Payments are based on your ability to pay, not the total amount owed.
Potential for Significant Tax Savings: If the Collection Statute Expiration Date (CSED) passes before the full liability is collected, the IRS is barred from collecting the remaining balance.
Protection from Enforcement Actions: Entering into a PPIA can stop IRS collection efforts, including wage garnishments and bank levies.
PPIA’s Drawbacks
Extensive Financial Disclosure Required: A complete Collection Information Statement (Form 433-A or 433-B) is necessary to assess your ability to pay.
Federal Tax Lien Filing: The IRS typically files a Notice of Federal Tax Lien to protect its interest.
Periodic Financial Review: Unlike other installment agreements, the IRS may reassess your financial situation—usually every two years—to determine if you can increase your monthly payment.
Difficult Qualification Standards: PPIAs are challenging to obtain. The IRS may require you to liquidate or borrow against assets before approving the agreement—although complete utilization of equity is not always required.
Requesting a Partial Payment Installment Agreement (PPIA):
Although requesting a PPIA is generally less time-consuming than pursuing an Offer in Compromise, it still requires careful preparation and a solid understanding of IRS rules. You must disclose detailed financial information and be prepared to negotiate with the IRS.
As with any IRS installment agreement, ongoing compliance is essential. This includes:
Filing all previously required tax returns before the PPIA can be approved;
Timely filing of all future required tax returns;
Paying all future taxes in full and on time.
Failure to comply with these conditions can result in the IRS defaulting the PPIA and resuming collection actions.