When & How to Request a Partial Payment Installment Agreement
A more difficult Installment Agreement (IA) to obtain with the IRS that allows you to pay less than what you owe through a series of monthly payments is called a Partial Payment Installment Agreement (PPIA), or Part Pay Agreement because it allows you to partially pay your IRS back taxes over time (not in full). Just like the Verified Financial Installment Agreement (VFIA), this type of agreement requires full disclosure of your financial information including all income, assets and liabilities through the use of Form 433 (A, B, or F). It is an IRS settlement method that is easier to obtain than a Offer In Compromise (OIC) especially if the IRS has rejected a recent OIC of yours.
This IA method was enacted by Congress in 2004 and became effective in 2005. It should be pursued if you can prove financially that you cannot pay your tax liabilities under the terms of a normal installment agreement. Typically, before the IRS grants you a PPIA, they will look to see if you have any assets to satisfy unpaid taxes (there are exceptions). Once you have no other options to repay your taxes, and your reasonable collection potential (work with tax pro on calculating) is less than your outstanding tax liabilities then a PPIA may be accepted by the IRS. Your monthly payment is determined by your Collection Information Statement 433-A for individuals, and 433-B for businesses (updated every two years), which tells the IRS how much or what your ability to pay is. This type of agreement leads to the taxpayer paying less because as the Statute of Collection expires on each period, that part of your tax debt becomes “uncollectible.” Normally, the Statute of Collections period is ten years from the date the taxes were assessed.
Requirements for a Partial Payment Installment Statement
- IRS taxes from previous years must have been filed and paid
- Over $10K in combined IRS tax debt, penalties and interest.
- Form 433-A, Form 433-B or Form 433-F – The Collection Information Statement.
- Form 9465 – Installment Agreement Request
- Cannot be in bankruptcy or have had an Offer in Compromise accepted
- Voided check, credit card, bank information
- You have no assets. If you do, then the equity you have in your assets to qualify:
- Cannot be obtained, because your assets are not marketable
- Should not be obtained through a sale, because the income the asset(s) generate can satisfy the requirements of the PPIA and offer better collection potential than a sale
- Is not sufficient to obtain a loan
- If you’ve received a loan, you would have no disposable income if you paid monthly loan payment
- Off limits, because your non-liable spouse does not want her part of the asset she owns sold
- Can be accessed, but it would create financial hardship.
How to Request a Partial Payment Installment Agreement
- First, print and complete IRS Form 433-A (IRS Form-B if you are a business), Collection Information Statement. You’ll need your Social Security Number/TIN, Spouse’s SSN or TIN (if applicable), address and phone numbers as well backup documentation for expenses and income with the form.
- Directions for Form 433 (Collection Information Statement) – See Verified Financial Agreements for specifics.
- Next, print and fill out Form 9465, the Installment Agreement Request or call 1-800-829-1040 to have it mailed to you. The directions on Form 9465 will give you guidance with completing. Include your user fee ($52 if direct debt and $120 if not). Make sure to include your first month’s payment with your user fee. If you fail to pay a certain month, then you need to pay a reinstatement fee of $45 with the IRS.
- Next, you must calculate the monthly payment amount you can afford. This is where a professional can help. To figure out what you should pay per month is not easy. You first need to know how much you owe including any penalties and interest, and the remaining statue of limitation periods left on collecting that debt and the collection potential or what you can afford. This is where you should reach out to a tax professional as this calculation can be challenging.
- Send Form 9465 (if not using OPA) with your tax return (1040), including your completed 433-A form, with the first payment and user fee and send it to the IRS. If you efile your return, then send payment and forms 9465 and 433 to the IRS. Here, you can double check the appropriate Automated Collection System Unit IRS address.
- Usually, the IRS will let you know if this installment agreement was accepted within 30 days. Feel free to call them if you don’t see hear back in 1 month. However, if you don’t hear continue to make payments and call the IRS.