Partial payment installment agreement: paying what you can until the IRS deadline runs out

What a partial payment installment agreement is

A partial payment installment agreement is a monthly plan in which the payments, added together, will not cover the whole debt before the IRS runs out of time to collect. The IRS generally has 10 years from the date a tax is assessed to collect it. That end point is the collection statute expiration date, or CSED.

Congress allowed this kind of agreement in 2004 by amending section 6159 of the Internal Revenue Code. Before that, an installment agreement had to pay the balance in full. A PPIA accepts that full payment is not realistic and sets the payment at what your budget can bear.

It is not a settlement. The full debt stays on the books, interest and penalties keep accruing, and the IRS can raise your payment if your income improves. What you gain is a formal agreement that generally keeps levies on hold while you comply, and a finish line set by the CSED.

Who qualifies for a PPIA

The IRS partial payment installment agreement requirements come down to two tests: you cannot pay the debt in full by the CSED, and you have no reasonable way to raise the money from assets. The Internal Revenue Manual (IRM 5.14.2) spells out both.

• Current on filing. As with any installment agreement, all required returns must be filed.
• Full financial disclosure. The IRM requires a complete collection information statement for every PPIA, usually Form 433-A (or Form 433-F in some cases), with proof of income, expenses and assets.
• Equity addressed first. Before approving a PPIA, the IRS expects you to use equity in assets, such as selling or borrowing against property, when that is realistic.
• Maximum payment. You must agree to pay the most you can afford each month, based on the financial analysis.

When you do not have to sell or borrow

The IRM lists situations where a PPIA can be granted even though you own something with equity. These include equity that is minimal, equity you cannot legally reach, an asset nobody would buy, an asset you need to earn a living, a sale that would cause economic hardship, and a loan whose payment would be more than the income you have left over. Otherwise, you will normally be asked to make a good-faith attempt to use the equity first.

How to request a partial pay installment agreement

There is no separate PPIA application. You ask for an installment agreement and offer a payment that will not clear the balance by the CSED. The IRS then reviews it as a partial payment request.

1. Find your CSED for each tax year. Our CSED date page explains how to get it from your account transcript.
2. Complete a collection information statement. See our Form 433-F guide; the IRS may also ask for Form 433-A.
3. Gather proof: pay stubs, bank statements, rent or mortgage statements, vehicle loans and medical bills.
4. Submit the request with Form 9465 by mail, by phone, or through the Revenue Officer assigned to your case. The Form 9465 instructions note that a payment that will not pay in full by the CSED may be considered for a PPIA.
5. Respond quickly to any request for more information, since the review cannot finish without it.

Because every PPIA needs a full financial statement and an ability-to-pay analysis, expect it to be handled by IRS staff rather than approved automatically online. Our Form 9465 instructions cover the paper request.

Does a PPIA let the collection statute expire?

Yes, that is the point of it. If you keep the agreement and your finances do not improve, the unpaid remainder becomes uncollectible when the CSED passes. A worked example shows the effect.

Two details can move the finish line. First, the CSED is suspended while an installment agreement request is pending, and for 30 days after a rejection, so the clock pauses while the IRS reviews your request. Second, in limited situations the IRS may ask you to sign Form 900 to extend the CSED; the IRM caps such extensions at five years beyond the original CSED plus up to one year. Read any Form 900 carefully before signing. Our collection statute of limitations page covers the other events that pause the clock.

Will the IRS review my PPIA?

Yes. The IRM sets a financial review cycle of about two years for partial payment agreements. The IRS will ask for updated income, expense and asset details.

• If your ability to pay has not changed significantly, the payment stays the same until the statute expires.
• If your income rises or you acquire assets, the IRS can raise the payment, and in some cases the plan may move toward full payment.
• If your income falls, you can ask for a lower payment, or the IRS may consider hardship status instead.

PPIA versus an offer in compromise

Both options can leave part of the debt unpaid, but they work differently. An offer in compromise settles the debt now for a set amount; a PPIA lets the clock run out while you pay monthly.

A PPIA tends to suit people with steady but limited income and several years left on the CSED. An offer may suit people who can raise a lump sum from family or a loan and want a clean end date. If you cannot afford any payment at all, Currently Not Collectible status is the other route to compare.

Living with a PPIA

The plan has the same basic conditions as any installment agreement. Pay on time, file every return on time, and pay each new year's tax in full. Breaking those terms can lead to a default notice and the loss of the plan.

Some benefits come with staying current. The failure-to-pay penalty drops to 0.25% a month if you filed on time, and debt in a timely paid installment agreement is not certified to the State Department for passport action. If the plan starts to slip, our payment plan not working page explains how to ask for changes before a default. The IRS payment plan guide compares PPIAs with the standard plans.