Partial Payment Installment Agreement: Pay Less Than Your Full Tax Debt
A Partial Payment Installment Agreement (PPIA) is an installment agreement where your monthly payment, over the remaining life of the collection statute, will not pay off the full balance. The remaining debt expires when the statute expires — you legally never pay the rest.
What Is a Partial Payment Installment Agreement?
A PPIA is a formal installment agreement where the IRS agrees to accept monthly payments based on your actual ability to pay, even when those payments will not fully retire the debt before the 10-year collection statute expires. At the end of the statute, the unpaid balance is legally extinguished — the IRS cannot collect it.
How a PPIA Differs from a Standard Installment Agreement
A standard Streamlined Installment Agreement requires a payment that pays the full balance within 72 months. A PPIA requires a detailed financial disclosure (Form 433-A or 433-B) and IRS approval. The monthly payment is based on your actual disposable income after allowable expenses — it can be much lower than what a Streamlined agreement would require.
PPIA Eligibility Requirements
To qualify for a PPIA: your disposable income (income minus allowable IRS expenses) must be insufficient to pay the full balance before the collection statute expires; you must have no equity in assets that could satisfy the debt; you must be fully compliant with all filing requirements; and the IRS must determine that the PPIA is in the government's best interest given your financial situation.
The PPIA Application Process
You must submit a complete financial disclosure on Form 433-A (for individuals) or Form 433-B (for businesses). The IRS reviews income, expenses, and assets in detail. A tax professional can properly document allowable expenses — including transportation, housing, food, and healthcare — using IRS National and Local Standards to maximize the allowable amounts and minimize your monthly payment.
PPIA Monitoring and Compliance
The IRS reviews PPIA cases every two years. If your financial situation improves significantly, the IRS can modify the payment upward. If you miss payments or fail to file future returns, the IRS can default the PPIA and resume full collection action. Staying compliant is critical.
Frequently Asked Questions
What is the difference between a PPIA and an Offer in Compromise?
An OIC settles the debt immediately for a lump sum or short-term payments. A PPIA is an ongoing monthly payment arrangement that expires when the collection statute runs. Both result in paying less than the full amount owed.
Can I get a PPIA if I own real estate?
Equity in real estate is considered an available asset. If your home equity exceeds your tax debt, the IRS will expect you to access it (refinance or sell) rather than accepting a PPIA. Low or negative equity improves PPIA eligibility.
Does the collection statute continue during a PPIA?
Yes. Unlike an OIC (which suspends the statute), a PPIA allows the statute to keep running. This is one of the advantages — the remaining balance expires at the end of the 10-year period.
How do I calculate if a PPIA will benefit me?
Determine the remaining months on your collection statute, multiply your proposed monthly payment by that number, and compare the result to your total balance. If the product is less than the balance, you will never fully pay — the remainder expires.
Can I propose a PPIA myself?
You can, but the financial disclosure process is complex and the IRS scrutinizes expense claims carefully. A professional who knows IRS National Standards can significantly increase the approved monthly payment and improve your proposal.
What happens if I get a raise during a PPIA?
The IRS reviews PPIA cases every two years. A significant income increase could result in a higher required monthly payment. Modest cost-of-living increases may not change the payment.
Partial Payment Installment Agreement: Pay Less Than Your Full Tax Debt Services in Los Angeles
Calculus Tax, Inc. provides partial payment installment agreement: pay less than your full tax debt services to individuals and businesses throughout Los Angeles County. Our licensed CPAs are based in Burbank and serve clients in Los Angeles and surrounding communities.
Our Burbank office serves clients throughout Los Angeles County including Los Angeles, Long Beach, Santa Monica, Glendale, Burbank, and more.
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