A Partial Pay Installment Agreement (PPIA) can help you if you can't pay your full IRS bill. It lets you pay less each month, but you won't be able to pay off the amount before the IRS collection clock runs out. This guide tells you who can apply, how payments are set, what documentation you need, how to apply, and what to expect if your application is approved.
What is a Partial Pay Installment Agreement?
A Partial Pay Installment Agreement is a way to pay the IRS a small amount each month until the collection statute expiration date (CSED) runs out, which is normally 10 years after the assessment. When the statute ends, any sum that hasn't been paid is written off.
Key points:
While you're paying, interest and fees keep adding up.
The IRS might send you a Notice of Federal Tax Lien.
The IRS checks your finances every two years and may vary your payment amount if your ability to pay changes.
You must keep up with all future taxes and filings, or the deal will be void.
A PPIA is different from a regular installment agreement because you’re not expected to full-pay the tax. It’s also different from an Offer in Compromise, which tries to settle the debt for a lump sum or short-term payments.
Who qualifies for a Partial Pay Installment Agreement?
You must show that, even with a reasonable monthly payment and any accessible equity, you cannot fully pay the tax before the CSED. The IRS verifies this using detailed financial disclosures.
You’re generally a good candidate if:
You’ve filed all required tax returns and are currently on withholding or estimated taxes.
Your monthly disposable income, after IRS-allowed living expenses, is limited.
You have little or no accessible equity in assets, or liquidating assets would cause hardship or isn’t practical.
You can make a consistent monthly payment but not enough to pay in full before the statute runs out.
You’re not in an open bankruptcy case and don’t have a pending Offer in Compromise that conflicts with the request.
The IRS uses national and local “allowable expense” standards for necessities like food, housing, utilities, transportation, and healthcare. Only the portion of your expenses that fits those standards usually counts, which is why honest budgeting and documentation matter.
How the IRS calculates your PPIA payment
The IRS starts with your gross income, subtracts allowable living expenses, and calculates your monthly disposable income. That amount becomes the baseline payment. They also look at:
Equity in assets (cash, investments, vehicles, home). If equity is accessible without causing hardship, they may expect you to borrow or sell, or explain why that’s not feasible.
Time left on the statute. If there’s only a short time left, they still may approve a partial pay, but they’ll try to collect what’s reasonable in that window.
Reasonable Collection Potential (RCP). This is the IRS’s estimate of what they could collect from your income and assets. If your RCP is less than what’s owed, a PPIA is often appropriate.
How to apply for a PPIA
Step 1: Get fully compliant. File all missing returns and fix your current-year withholding or estimated taxes so you don’t create a new balance.
Step 2: Gather documents. Expect to provide pay stubs, bank statements, proof of expenses (rent, utilities, insurance, medical), loan statements, and details on assets.
Step 3: Complete financials. Individuals use Form 433-F (or 433-A if working with a revenue officer). Businesses use 433-B. These forms detail income, expenses, and assets. You’ll usually submit Form 9465 to request the agreement.
Step 4: Propose a realistic payment. Base it on allowable expenses and what you can truly afford every month. Direct debit (automatic bank draft) improves approval odds and helps you avoid default.
Step 5: Expect a lien and a review. The IRS often files a tax lien for PPIAs, and they’ll recheck your finances about every two years.
Step 6: Pay setup fees. The IRS charges those who use installment agreements a fee, but people who pay by direct debit or who are low-income pay less. Fees can change, so check the amount before you apply.
The IRS needs to look at your finances before you can put up a PPIA completely online. After you fill up the applications, you normally apply by phone or mail.
What happens after approval
You make monthly payments until the statute expires, you fully pay, or the agreement ends. Refunds will be applied to your balance while you’re in the plan. If your income rises or debts drop, the IRS may increase your payment at the two-year review. If your finances worsen, you can ask for a lower payment or a different option.
Default can happen if you miss payments, file late, or owe new taxes. Staying current is just as important as making the monthly payment.
Partial Pay Installment Agreement vs. other options
Offer in Compromise: Best if your reasonable collection potential is very low and you can’t pay more than a minimal amount. Stricter review and a longer process, but can settle for less than a PPIA.
Currently Not Collectible (CNC): If you can’t pay anything after allowable expenses, the IRS may pause collection. Interest accrues, and they’ll revisit later. If your income increases, you might move from CNC to a PPIA.
Regular/Streamlined Installment Agreement: If you can fully pay within the time left (often within 72 months) without financials, streamlined may be faster and simpler. If you can’t full-pay, PPIA fits better.
Tips to improve your approval odds
File every return and adjust your current-year withholding or estimates so you don’t add new debt. Prepare accurate budgets using IRS standards and keep proof for every expense. Choose direct debit and propose a payment you can sustain long term. If you have unusual expenses (like necessary medical care), document them and be ready to explain. Consider having an enrolled agent, CPA, or tax attorney present your case if your situation is complex.
Common mistakes to avoid
Don’t hide assets or understate income; the IRS verifies. Don’t overstate unallowable expenses; stick to what the IRS typically allows unless you can document special circumstances. Don’t miss the two-year review notices. And don’t ignore new tax obligations; one new balance due can unravel your agreement.
The bottom line
A Partial Pay Installment Agreement is designed for taxpayers who can pay something but not enough to clear the full balance before the IRS’s collection period ends. If you’re compliant, document your finances carefully, and propose a realistic direct-debit payment, you have a solid chance to qualify. For many, it’s a practical, lower-stress path to resolve tax debt without an unaffordable lump sum.
