A partial pay installment agreement (PPIA) is an IRS payment plan that ends before your balance does. You pay an affordable amount each month until the statute of limitations expires, and the IRS writes off whatever remains, meaning the debt generally becomes legally uncollectible rather than forgiven. Congress authorized it in 2004, and the IRS administers it under Internal Revenue Manual 5.14.2.
This page covers who qualifies, how the IRS sets your payment, what the two-year review does to it, and how a PPIA compares to an offer in compromise. Every figure here is current as of August 2026 and sourced to the IRS or the U.S. Code.
A PPIA is an installment agreement that will not fully pay your tax debt before the collection statute expiration date (CSED). You make monthly payments for the remaining life of the statute. If a balance remains when the CSED expires, the IRS generally can no longer collect it.
The authority is 26 U.S.C. § 6159(a), which lets the IRS enter into agreements that facilitate “full or partial” collection. Those three words were added by the American Jobs Creation Act of 2004, Pub. L. No. 108-357, § 843. Before 2004, every installment agreement required payment of the debt in full.
Here is what that looks like in dollars. These are illustrations, not predictions, and they set aside penalties and interest that keep running on the unpaid balance.
| Situation | Balance owed | Time left on the CSED | Monthly payment | Total you pay | Written off at the CSED |
|---|---|---|---|---|---|
| Four years left, modest income | $60,000 | 48 months | $250 | $12,000 | $48,000 |
| Seven years left, smaller balance | $25,000 | 84 months | $150 | $12,600 | $12,400 |
| Six years left, payment raised at the two-year review | $60,000 | 72 months | $200 for 24 months, then $450 | $26,400 | $33,600 |
The third row is the one people miss. A PPIA is not a fixed number for the life of the agreement.
A PPIA generally requires two things: you cannot pay the balance in full before the CSED, and you can still pay something every month. You also have to meet the IRS’s filing and payment compliance requirements, covered below.
Beyond that, the IRS requires a full Collection Information Statement, addresses any equity in your assets first, and applies a stricter expense standard than it uses for an ordinary payment plan. Under IRM 5.14.2.2.1, only necessary expenses are permitted on a PPIA. Conditional expenses that a standard agreement might allow are disallowed here.
No. There is no minimum balance for a PPIA. IRM 5.14.2 contains a worked example approving a PPIA on an $1,800 balance at $100 per month.
The $10,000 figure that circulates online comes from a different rule. 26 U.S.C. § 6159(c) requires the IRS to accept a guaranteed installment agreement when the liability does not exceed $10,000, and other conditions are met. That is a ceiling on a separate program, not a floor on this one.
You need every required return filed, and you need to stay current going forward. That means filing on time, making estimated tax payments if you are self-employed, and making federal tax deposits if you run payroll. An open bankruptcy generally blocks a new installment agreement, and tax periods already covered by an accepted offer in compromise cannot be moved into a PPIA.
Expect the IRS to keep your federal refunds and apply them to the balance for every year the agreement runs. That is on top of the monthly payment.
Your payment is based on your monthly income minus the expenses the IRS allows, which may differ from your real expenses. That gap often decides a PPIA case.
The IRS runs the calculation against its Collection Financial Standards, which took effect June 29, 2026. National standards cover food, clothing, personal care, and out-of-pocket health care. Local standards cover housing, utilities, and transportation, and they vary by county. If your actual housing cost runs above the local standard for your county, the IRS credits the standard and counts the difference as money available to pay them.
The out-of-pocket health care allowance is a flat monthly amount per person, granted without receipts:
That allowance sits on top of what you pay for health insurance. Spending above it is allowable, but you have to document it.
You report the underlying numbers on Form 433-A or Form 433-B. Our guide to the 433-A, 433-B, and 433-F walks through each form line by line.
The IRS generally loses its legal authority to collect it. A PPIA lets you make affordable payments until the collection statute expires. If a balance remains at that point, it is generally no longer collectible.
Under 26 U.S.C. § 6502(a)(1), the IRS generally has 10 years from the date a tax is assessed to collect it. Assessment is not the same as the filing date, and each tax year carries its own CSED. A taxpayer with six unfiled years has six separate clocks. You can pull the assessment dates from your IRS account transcript.
Certain events pause the clock and push the CSED later, including bankruptcy, time spent outside the country, and a pending collection due process hearing. Our page on whether tax debt ever expires covers the tolling events in detail.
An agreement already in effect does not suspend the CSED. A pending request can.
This distinction sits in 26 U.S.C. § 6331(k). The statute suspends the collection period while the IRS is barred from levying, and it bars levy while an installment agreement request is pending, for 30 days after a rejection, and during an appeal. Section 6331(k)(3)(B) then carves out the period when an agreement is in effect. So the clock keeps running while you make PPIA payments, which is the entire reason a PPIA works.
A pending offer in compromise does suspend the clock. Filing an offer, waiting a year for a decision, getting rejected, and then requesting a PPIA can add well over a year to the collection period and thousands of dollars to what you ultimately pay.
Separately, the IRS can ask you to sign a Form 900 waiver extending the CSED as a condition of a PPIA. The extension itself is capped at five years, plus up to one additional year. Under § 6502(a)(2)(A), the collection period then runs to 90 days past whatever date is agreed to in the waiver. Read any waiver carefully before signing.
Often, yes. IRM 5.14.2.2.1 requires that equity in assets be addressed and, where appropriate, used to make payment before a PPIA is granted.
The IRS looks at equity in your home, vehicles, retirement accounts, investment accounts, and business property. Depending on the circumstances, it may require you to sell an asset or borrow against it before approving reduced monthly payments. Relevant considerations can include:
Each of those arguments has to be documented and made before the agreement is written, not after.
The IRS re-examines your finances and can raise, lower, or leave your payment alone. It is a statutory obligation on the IRS, not an application you refile.
26 U.S.C. § 6159(d) requires the Secretary to review a partial-collection agreement at least once every two years. Under IRM 5.4.11.9, the case is assigned to Centralized Case Processing, which mails a CP 522P letter. Here is the sequence:
Failing to respond to the CP 522P can put the agreement at risk of default or termination. The review can result in a higher payment, a lower payment, no change, full payment, or a determination that you cannot pay at all.
The IRS setup fee ranges from $29 to $178, depending on how you apply and how you pay. Because a PPIA requires a full financial disclosure, it’s typically set up by phone, mail, or in person rather than through the online self-service tool, so expect a fee closer to the $107–$178 end. Direct debit is cheaper across all channels.
| How you apply | Payment method | Setup fee |
|---|---|---|
| Online | Direct debit | $29 |
| Online | Any other method | $69 |
| Phone, mail, or in person | Direct debit | $107 |
| Phone, mail, or in person | Any other method | $178 |
| Low income, any channel | Direct debit | Waived |
| Low income, any channel | Any other method | $43, reimbursable if conditions are met |
| Reinstate or restructure, online | Any | $6 |
| Reinstate or restructure, by phone, mail, or in person | Any | $89 |
Low income means adjusted gross income at or below 250% of the applicable federal poverty level. You claim the waiver on Form 13844. Current fees are published on the IRS payment plans page.
The setup fee is the small cost. Failure-to-pay penalties and interest keep accruing on the unpaid balance for the entire life of the agreement, which is why the amount written off at the CSED is usually larger than the original balance suggests.
You submit a Collection Information Statement and negotiate the monthly amount with the IRS. Because a PPIA requires this level of financial disclosure, you cannot use the no-disclosure process available for qualifying Simple Payment Plans.
Which of these forms applies depends on your case type and how it’s worked, not on which one you pick:
| Form | What it does | When it applies |
|---|---|---|
| Form 433-A | Collection Information Statement for wage earners and self-employed individuals | Required for individual PPIAs worked in Field Collection |
| Form 433-B | Collection Information Statement for businesses | Required for business and entity PPIAs |
| Form 433-F | Shorter collection information statement | Campus and ACS cases, and as the attachment to Form 9465 |
| Form 433-D | The signed installment agreement itself | Marked PPIA in red at the top when the agreement is approved |
| Form 9465 | Installment Agreement Request | Optional. One of four ways to ask for an agreement |
| Form 13844 | Application for Reduced User Fee for Installment Agreements | Low-income taxpayers seeking a waiver or reimbursement |
| Form 2159 | Payroll Deduction Agreement | When payments come out of your paycheck |
Plan on assembling recent pay stubs, three to six months of bank statements, proof of assets, and records of household expenses. If you defaulted on an installment agreement in the previous 24 months, the IRS will generally require direct debit or payroll deduction.
For the mechanics of other agreement types, see our overview of how to set up an IRS payment plan.
A PPIA fits when you can pay something monthly but not everything. An offer in compromise fits when you can raise a lump sum that meets or beats what the IRS could otherwise collect. Currently not collectible fits when you can pay nothing at all.
| Option | Core test | What you pay | How long it runs | Finality | Ongoing review | IRS fee |
| Partial pay installment agreement | You cannot fully pay before the CSED but can pay monthly | Monthly amount set by allowable disposable income | Until the CSED expires | Balance written off at the CSED | At least every two years, by statute | $29 to $178 setup |
| Offer in compromise, doubt as to collectibility | Your offer meets or exceeds your reasonable collection potential | Lump-sum offer: 20% down with the application, remainder within 5 months. Periodic-payment offer: first month’s payment with the application, remainder within 6 to 24 months | Investigation can take up to 24 months | Debt settled and closed | Five years of filing and payment compliance | $205 application fee, waived for low income |
| Currently not collectible | Any payment would create financial hardship | Nothing while the status holds | Until the IRS finds your finances improved | None. The balance stays and keeps accruing | The IRS reviews periodically | No fee |
| Simple Payment Plan (formerly streamlined installment agreement) | Balance within the plan’s eligible limits and full payment before the CSED | The full balance plus penalties and interest | A set term inside the CSED | Debt paid in full | None | $29 to $178 setup |
Two numbers matter when weighing a PPIA against an offer. First, the IRS accepted 5,464 of the 38,797 offers submitted in fiscal year 2025, roughly 14%, per the IRS Data Book (Publication 55-B). That historical figure does not predict the outcome of an individual taxpayer’s offer. Second, the IRS says a complete offer investigation can take up to 24 months, and 26 U.S.C. § 7122(f) deems an offer accepted if the IRS does not reject it within 24 months of submission.
Our full breakdown of the IRS offer in compromise program covers the reasonable collection potential formula and the Michigan state offer program. If the IRS already turned down an offer, read what to do when the IRS rejects your offer in compromise.
You have 30 days to appeal to the IRS Independent Office of Appeals, and the IRS cannot levy while a request or an appeal is pending.
A common reason for rejection is a determination that you can fully pay, either from income or from equity the IRS expects you to address. Rejections often come with a counter-proposal at a payment you cannot sustain. Accepting that number and defaulting three months later is worse than appealing.
The levy protection during a pending request and during the appeal comes from § 6331(k)(2). You can read more about the Independent Office of Appeals on the IRS site, and about appealing a related determination in our guide to appealing a denial of currently not collectible status.
Missing a payment, failing to file a return, incurring a new balance, or ignoring the CP 522P review letter can each put the agreement into default.
A defaulted PPIA restores the IRS’s full collection powers, including levies on wages and bank accounts. Reinstating costs $6 online or $89 through other channels, and it is reduced or reimbursable for low-income taxpayers. Reinstatement is not automatic. If your finances changed, the IRS may set a higher payment or decline to reinstate at all.
Expect the IRS to make a Notice of Federal Tax Lien determination in a PPIA case. Depending on the circumstances, the IRS may file an NFTL to protect its interest in your property.
Yes. A business requests a PPIA using Form 433-B instead of Form 433-A. A responsible person assessed the Trust Fund Recovery Penalty personally still files Form 433-A, since the penalty is a personal liability rather than the business’s own tax debt. Business agreements carry their own two-year review cycle, flagged as a PPIA BMF two-year review on the agreement form.
Payroll tax cases carry rules an income tax case does not, including deposit compliance requirements and personal exposure for responsible persons. Our page on paying off past-due business taxes covers those in detail.
Michigan runs an installment agreement program and a separate offer in compromise program through the Department of Treasury. Neither is a state equivalent of the federal PPIA.
The state route to paying less than the full balance is the Michigan offer in compromise, established by Public Act 240 of 2014 amending the Revenue Act. Treasury requires $100 or 20% of your offer, whichever is greater, with the application, and effective April 1, 2025, an applicant must file one of the Form 5181 series to be considered. The state installment agreement program is a payment plan, not a partial-pay program, and Michigan’s collection period runs on its own statute rather than the federal 10-year rule.
Michigan Treasury and the IRS work from different standards and different timelines. A taxpayer resolving both often needs two separate strategies running at once.
The monthly payment you agree to is the whole case. Set it too high, and you default. Set it too low without documentation, and the IRS rejects the request or counters with a number of its own.
Ayar Law handles IRS collection matters across Michigan and throughout the United States, from offices in Farmington Hills and Grand Rapids, Michigan. Call (248) 262-3400 to request a case review, or contact us through our website.
This page is general information about federal and Michigan tax collection procedures. It is not legal advice, and reading it does not create an attorney-client relationship. IRS user fees, financial standards, and program rules change. Outcomes depend on the facts of each case, and prior results do not predict future outcomes. Speak with a licensed tax attorney about your own situation before acting.
