When & How to Request a Partial Payment Installment Agreement
The Partial Payment Installment Agreement (PPIA) is similar to a regular installment agreement where you make monthly payments to the IRS for taxes owed. However, you are only paying back part of the taxes you owe over time. To apply, you must submit a full financial disclosure. That includes details about your income, assets, liabilities, and expenses.
Partial Payment Installment Agreements are harder to get than other types of Installment Agreements. However, they are easier to obtain than an Offer in Compromise. If the IRS has recently rejected an Offer in Compromise, you may want to apply for this instead.
Generally, the IRS only accepts these agreements if you don’t have enough assets to liquidate (there are exceptions) and you don’t have enough monthly disposable income to qualify for a regular installment agreement. In addition, the IRS must also believe that you are not going to earn enough money to cover your taxes owed in the upcoming years.
Your monthly payment is determined by your Collection Information Statement. 433-A is filled out by individuals, and 433-B by businesses. This form tells the IRS how much or what your ability to pay is. This type of agreement can lead to you paying less than you owe because as the collection statute expiration date (CSED) expires for each year you were assessed taxes, that taxes becomes “uncollectible.” Normally, the CSED period is ten years from the date the taxes were assessed.
Requirements for a Partial Payment Installment Statement
- You have some ability to pay the IRS, but you cannot pay in full by the Statute of
- Owe over $10,000 in taxes, penalties, and interest
- Completed Form 433 (Collection Information Statement)
- Completed Form 9465 (Installment Agreement Request) or applied for Installment Agreement online
- Filed all past tax returns
- Are not in bankruptcy
- Have not had an Offer in Compromise accepted
- Have no assets or can’t access equity in assets because:
- Assets are not sellable
- Selling assets would not cover taxes owed
- Assets are not sufficient collateral to obtain a loan
- Off limits, because your non-liable spouse does not want their part of the assets sold
- Selling the assets would create financial hardship
How to Request a Partial Payment Installment Agreement
- Print and complete Form 433-A if you are an individual or fill out 433-B if you are a business. See our page on Verified Financial Agreements for details on this form. Generally, will need backup documentation for expenses and income claimed on Form 433.
- Print and fill out Form 9465 (Installment Agreement Request) or apply for an Installment Agreement online.
- Estimate what you can pay every month. This can be tricky, as the IRS expects the maximum monthly payment that Form 433 shows you can afford. Your payment needs to cover your taxes owed without being too expensive for your budget—remember if you miss a payment, you may need to pay a reinstatement fee of $89 dollars or you can lose the agreement altogether.
- Send Form 9465, Form 433, and a copy of your tax return to the IRS. If you Efile, you don’t need to include a copy of your return.
To be on the safe side, send your first payment and the fee for the installment plan with your application. The fee is usually $225, but if you opt for direct debit, it is only $107.
- Wait. Usually, the IRS responds within 30 days.
- If you don’t get a response within a month, continue to make payments, but also contact the IRS directly.
Overall, if you cannot afford to make the minimum monthly payment on a regular installment agreement, a partial payment installment agreement could be your best option. This is true especially if you can afford to pay the IRS at least $25 dollars or more a month. If your collection information statement (form 433) shows you cannot afford to pay the IRS at least $25 dollars a month, you may want to pursue a non-collectible status. For more information on PPIAs, visit the IRS here.