What a PPIA is
Before 2004, an installment agreement had to full pay the liability. The American Jobs Creation Act of 2004 amended IRC 6159 so the IRS can enter into an agreement that will facilitate full or partial collection. IRM 5.14.2.2 describes the result: “If full payment cannot be achieved by the Collection Statute Expiration Date (CSED), and taxpayers have some ability to pay, the IRS can enter into Partial Payment Installment Agreements (PPIAs).”
The Form 9465 instructions put it simply: an agreement that will not pay the entire balance before the CSED is a PPIA. Whatever is unpaid when the CSED arrives is no longer collectible. That makes the PPIA a cousin of the offer in compromise: the government accepts less than full payment, but through monthly payments rather than a negotiated lump sum.
Requirements
IRM 5.14.2.2.1 sets the baseline: “A full Collection Information Statement is required for all PPIAs.” That means Form 433-A for individuals and Form 433-B for businesses; see collection information statements. Other requirements:
- Verification. The revenue officer compares stated income with the last return using IDRS research. If current income has dropped 20 percent or more, or undisclosed assets appear, the discrepancy must be discussed and documented; substantiation is not requested if the taxpayer gives a reasonable explanation. Higher balances require real property, DMV and personal property checks and, above a further threshold, a full credit report. The dollar thresholds are redacted in the public IRM.
- Maximum payment. “The taxpayer must agree to pay the maximum monthly payment based upon the taxpayer’s ability to pay.” For business cases, the ability to pay of all individuals responsible for the TFRP is considered as well.
- Prior defaults. Taxpayers who defaulted an agreement in the past 24 months must pay by direct debit or payroll deduction unless they are unbanked and unemployed or self-employed; if that is not possible, a PPIA may still be granted with the reason documented.
- Compliance. Current filing, withholding, deposits and estimated tax (IRM 5.14.2.2.4).
- Lien determination. An NFTL determination is required above a redacted UBA threshold.
For trust fund cases, the TFRP will usually be assessed because the underlying liability will not be paid in full; the only exception is when there is no collection potential from the responsible persons. See TFRP.
Equity in assets
Equity is where most PPIAs are won or lost. IRM 5.14.2.1.1: “Before a PPIA may be granted, equity in assets must be addressed and, if appropriate, be used to make payment. In some cases taxpayers will be required to use equity in assets to pay liabilities. However, complete utilization of equity is not always required as a condition of a PPIA.” IRM 5.14.2.2.2 lists when a PPIA may be granted without using equity:
| Situation | IRM example |
|---|---|
| No assets or equity, or available assets already liquidated | No asset / no equity case |
| Minimal equity, or not enough for a lender | Some lenders require equity greater than 20% of value |
| Taxpayer cannot use the equity | Tenancy by the entirety where the non-liable spouse declines to borrow |
| Asset is currently unmarketable | Vacant lot that cannot be sold until environmental rules are met |
| Asset is needed to produce income and future income exceeds sale value | Business equipment funding the payments |
| Using it would cause economic hardship | Fixed-income taxpayer whose only asset is the home |
| Loan payment would exceed disposable income | Taxpayer would not qualify for the loan |
When analysis shows a loan or sale should be attempted, “the taxpayer will normally be required to make a good faith attempt to utilize equity before the IRS will approve a PPIA,” including copies of loan application documents. A taxpayer who will not try is treated as a won't pay case, and levy or seizure may follow. If the attempt fails, the revenue officer must make and document a seizure or levy determination before granting the PPIA, using the IRM's template sentence: “Seizure (or levy) of (name of asset) has been considered, but it is not the appropriate resolution because (provide reason)”.
Document the lender's denial. A written refusal from a bank, with the application, is the evidence that satisfies the good-faith requirement and moves the case to a PPIA instead of a seizure discussion.
Expenses: necessary only
The six-year rule's generosity does not apply. IRM 5.14.2.2.1: “Conditional expenses not determined to be necessary are not allowed for PPIAs. Only necessary expenses are permitted.” When a taxpayer needs time to bring expenses down to allowable levels, only the minimum time necessary is given. The expense rules themselves are in IRM 5.15.1 and the Collection Financial Standards.
The Tax Court enforces that line. In Thompson v. Commissioner, 140 T.C. 173 (2013), a CDP case, the settlement officer computed a PPIA payment of $8,389 a month after disallowing $5,294 of claimed church tithing and children's college costs. The court held the disallowance was not an abuse of discretion, restating the IRM rule that “If a taxpayer requests a partial payment installment agreement, then the taxpayer is allowed only necessary expenses; conditional expenses are not allowed”, and rejected the taxpayer's Free Exercise Clause and Religious Freedom Restoration Act arguments. It also held that the permissive language on Form 433-A about tuition creates no entitlement, because “Form 433-A does not have the force of law and confers no rights on taxpayers.” For a practitioner, that means a PPIA proposal built on charitable giving, tuition or other conditional expenses will be recomputed without them, and Appeals will be sustained if it does so; the only openings the court recognized, reading the IRM then in effect, were a tithe that is a condition of compensated employment and college costs where the liability plus accruals would be paid within five years, neither of which a PPIA by definition can satisfy. For the compliance and documentation failures that justify rejecting an agreement outright, see installment agreements.
Approval, lien and processing
“All PPIAs require managerial approval.” Under IRM 5.14.2.2.5, the group manager checks for a thorough financial analysis, consideration of other collection means (asset liquidation, levy, offer in compromise), the rationale for letting the taxpayer keep assets with equity, and that the revenue officer did not push the taxpayer into hardship. If the manager disagrees, the case goes to independent administrative review and the taxpayer keeps appeal rights.
A continuous wage levy is not a substitute. IRM 5.14.2.2 notes that wage levies should not be used in place of a PPIA when the taxpayer is compliant and has provided financial information, unless the taxpayer refuses to sign Form 433-D, because a levy carries no IRC 7122 rights and no systemic review.
Campus and ACS cases with significant equity are transferred to a revenue officer after the taxpayer declines to borrow or sell (IRM 5.14.2.2.6). The equity thresholds for that transfer are redacted, except that the equity must represent at least 30 percent of the property's value.
CSED waivers on Form 900
IRC 6502(a)(2)(A) allows the collection period to be extended by written agreement when an installment agreement is entered into. IRS policy narrows that sharply. IRM 5.14.2.3: “CSED extensions are permitted only in conjunction with PPIAs and only in certain situations.” The rules:
- A waiver is considered where an asset will come into the taxpayer's possession after the CSED and liquidating it is the best resolution, for example a trust principal distribution due after the statute runs.
- A waiver is not required when the only way to pay after the CSED is continuing the agreement and the two-year review shows no significant change.
- “The waiver can only be secured at the inception of the PPIA and not during the two year review process, unless a new PPIA is executed at that time.”
- Extensions are limited to five years beyond the CSED plus up to one year, and require group manager approval.
- “Notify taxpayers they have the right to refuse to sign a waiver.” Refusal, however, means the request is recommended for rejection and referred for independent review.
Under IRM 5.14.2.3.2 and Treas. Reg. 301.6502-1(b)(1), an extension secured with an installment agreement expires 90 days after the agreed period ends.
The two-year review
IRC 6159(d): the IRS “shall review the agreement at least once every 2 years.” The Form 9465 instructions warn that the review may require a new financial statement and can raise, lower or leave unchanged the payment. Under IRC 6159(b)(3), a significant change in financial condition allows the IRS to alter, modify or terminate the agreement, after 30 days' notice under 6159(b)(5); failure to provide a requested financial update is itself a ground for modification or termination under 6159(b)(4)(C).
PPIA, offer or CNC
| PPIA | Offer in compromise | Currently not collectible | |
|---|---|---|---|
| Payments | Monthly, at full ability to pay | Amount negotiated under IRC 7122 | None required |
| Effect on CSED | Suspended while the request is pending; not while the agreement is in effect (IRM 5.1.19.3.5) | Suspended while pending, 30 days after rejection, and during an appeal (IRM 5.1.19.3.4) | Not listed among the suspension events in IRM 5.1.19.3 |
| Ongoing review | At least every 2 years (IRC 6159(d)) | See the offer page | Reactivation when income rises (IRM 5.16.1.6) |
| Lien | Determination required above a redacted threshold | See the offer page | Generally filed at $10,000 or more (IRM 5.16.1.2) |
If the projected PPIA payments over the remaining statute would total less than an offer amount, the PPIA may be cheaper; if the client expects income to rise, the two-year review can increase the payment. The reasonable collection potential calculator and RCP page help compare.
Questions practitioners ask
Will a PPIA leave a lien on file?
Often. IRM 5.14.2.2.1 requires a lien filing determination, or confirmation that a lien was already filed, for aggregate balances above a threshold the public IRM redacts. Lien withdrawal and release follow the normal rules in IRM 5.12.
Can a PPIA be approved if the client has home equity?
Yes, if one of the IRM 5.14.2.2.2 conditions applies, such as minimal equity, inability to borrow, or economic hardship, and the revenue officer documents why seizure is not appropriate. Otherwise the client will be asked to make a good-faith attempt to borrow against or sell the asset first.
Does a PPIA require Form 433-A even if the balance is small?
Yes. A full collection information statement is required for all PPIAs. The online payment agreement tool can direct a taxpayer who cannot meet the minimum payment to complete Form 433-F or Form 433-H, but a PPIA itself rests on full financial analysis.
Can the IRS ask for a CSED waiver at the two-year review?
Only if a new PPIA is executed at that time. IRM 5.14.2.2.3 says a waiver can only be secured at the inception of a PPIA, not during the review, and should not be obtained when a PPIA is reinstated.
Who approves a PPIA granted by Appeals?
IRM 5.14.2.2.5 notes that managers must approve PPIAs that Appeals has decided to grant and forwarded to the field for processing.
What happens when the CSED expires during a PPIA?
Collection of the unpaid balance ends. Under IRC 6401(a), any amount collected after the limitation period expires is an overpayment.