Structuring an IRS Partial Payment Installment Agreement to Settle Back Taxes
When taxpayers owe significant back taxes, they often assume their only options are paying the full amount in regular monthly installments or negotiating a lump-sum Offer in Compromise (OIC). However, strict OIC equity rules disqualify many people who own modest assets or have steady incomes.
For taxpayers caught in this middle ground, the IRS provides a powerful statutory alternative under Internal Revenue Code Section 6159(d): the Partial Payment Installment Agreement (PPIA).
How a PPIA Operates: Under a standard Installment Agreement, your monthly payment is calculated to fully pay off the debt within 72 months. Under a PPIA, your payment is based solely on your documented monthly disposable income, regardless of the total balance owed. You pay that lower monthly amount until the 10-year Collection Statute Expiration Date (CSED) arrives, at which point the remaining balance is wiped out by law.
Comparing IRS Resolution Programs
Resolution Option | Monthly Payment Requirement | Asset Equity Impact | Outcome at Term End |
Standard Installment Agreement | Calculated to pay the full balance plus ongoing interest and penalties within 72 months. | Retain assets without liquidation. | Debt is paid in full. |
Offer in Compromise (OIC) | Lump-sum or short-term installment equal to Reasonable Collection Potential. | Requires equity in assets to be factored into the cash offer. | Debt settled for less than full balance. |
Partial Payment Installment Agreement (PPIA) | Based strictly on excess disposable income (such as $150/month on a $90,000 balance). | IRS reviews asset equity; unliquidatable assets can be retained. | Remaining unpaid debt is extinguished when CSED expires. |
Qualifying for a PPIA Under Modern IRS Collection Standards
To secure a PPIA, you must provide full financial disclosure through Form 433-A (Collection Information Statement) or Form 433-F:
- Allowable Living Expense Offsets — We compare your income against the IRS National and Local Standards for housing, utilities, food, and transportation to minimize your calculated disposable income.
- Asset Equity Review (IRM 5.14.2.1.2) — If you own real estate or vehicles, we demonstrate that liquidating those assets or borrowing against them is impossible due to lack of market equity or adverse borrowing conditions. We must address equity in assets before a PPIA is granted, but the IRS cannot force liquidation if borrowing against the asset creates economic hardship or if equity is negligible.
- Two-Year Review Cycle — The IRS reviews PPIA agreements every 24 months under IRC § 6159(e) (and IRM 5.14.2). If your financial situation remains unchanged, the agreement continues uninterrupted until the 10-year CSED runs out, permanently closing the account.
Do not agree to standard 72-month terms you cannot afford. Our licensed team calculates your true Reasonable Collection Potential and secures partial payment relief under IRC § 6159(d). Get professional representation today.