Partial Pay Installment Agreements In the Dark

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A recent TIGTA report highlights the redheaded stepchild of collection alternatives, partial pay installment agreements (PPIAs). The report discusses how relatively infrequently taxpayers enter into PPIAs and reveals how a lack of outward facing information about PPIAs contributes to their low use and jeopardizes taxpayer rights. 

The TIGTA report’s use of a taxpayer rights framework in evaluating the IRS’s performance in administering PPIA’s is significant, and highlights the relationship of taxpayer rights to tax collection. (For more on that relationship, see Nina’s post discussing the upcoming Seventh International Taxpayer Rights Conference, which focuses on tax collection and taxpayer rights).


What is a PPIA?

A PPIA is a form of installment agreement (IA) where a taxpayer makes regular monthly payments but the payments do not pay fully the liability.  Congress gave IRS authority to enter into these types of installment agreements as part of the 2004 American Jobs Creation Act.  This allows for taxpayers who cannot  fully pay their liability over time to make some payments. At the end of the PPIA, the IRS is prohibited from collecting the balance because the SOL has expired. Taxpayers get the benefit of avoiding levy (though are subject to offset), and IRS is required to check in every two years to see if their financial conditions have changed.

For taxpayers who enter into a PPIA, as with other IAs (i.e., Guaranteed, Streamlined and Routine IAs), taxpayers must make their monthly payments on time and remain compliant with all of their tax obligations. A taxpayer who misses two monthly payments typically receives a letter giving the taxpayer the option to resume payments. Following the letter, a taxpayer who does not contact the IRS or does not make another payment will lead to IRS terminating the PPIA.

As TIGTA notes, installment agreements are down generally over the past few years, and PPIAs in particular have dropped significantly. PPIAs comprise only two percent of new IA’s from FY 16 to FY 20, and even lower number of all IA’s in IRS inventory:

Why Are PPIA Numbers So Low?

Of course, in the COVID-19 era collection numbers are down generally, but the report illustrates a lack of use of PPIA that has nothing to do with COVID-19.The report suggests that the low number of PPIA’s may be due to the absence of any information about PPIAs on the IRS web page. Even if someone knows enough to search for PPIAs on the IRS web page, the result comes up empty when it comes to outward facing guidance (you do get access to an IRM and a mention on the TAS Roadmap). In addition, the IRS form for submitting an IA request, Form 9465, and its instructions, also fail to mention PPIAs.

As a result, to know that they have the right to request this collection alternative, taxpayers facing possible enforced collection are greatly dependent on IRS to suggest the PPIA collection alternative: 

Unless revenue officers or Automated Collection System employees make the decision whether to place taxpayers accounts into Currently Not Collectible (CNC) status or place taxpayers on a PPIA, taxpayers may be unaware the PPIA is a collection option available with the IRS.

TIGTA then rightfully notes how this undermines taxpayer rights:

Under the Taxpayer Bill of Rights, taxpayers have the right to be informed, and this should include the right to request PPIA agreements to address delinquent tax accounts with the IRS….Taxpayers are also statutorily entitled to an independent review of any IA request, including a PPIA, that is denied as well as to a hearing before the Office of Appeals for a rejected IA

However, because there is no clearly established mechanism for a taxpayer to request a PPIA and information about PPIAs is very limited, taxpayers appear to be effectively denied these rights.

In addition to directly noting the relationship of the IRS’s failure to publicize PPIA’s on taxpayer rights, TIGTA notes that the IRS’s Burden Reduction program has recommended that IRS make changes to Form 9465 but IRS has resisted.

What Reason Would IRS Have For Not Making This Information More Available?

TIGTA noted that during the audit IRS offered “various rationales” for not beefing up the 9465 to include PPIA’s but at the conclusion settled on the following: 

  1. A change is not necessary because the form already allows the taxpayer to propose any amount to pay monthly;
  2. IRS employees would be inundated with PPIA requests if taxpayers were made aware of PPIAs on the form; and
  3. Rejected PPIAs would cause taxpayers to flood the Office of Appeals while pursuing their statutory rights to appeal.

According to IRS, this would “lead to an avoidable and inefficient expenditure of resources to address PPIA proposals for taxpayers that do not qualify as well as an undesirable customer experience for the taxpayer.“


As TIGTA noted, the IRS rationale in support of its decision to not modify the 9465 could justify denying taxpayer information to other statutorily created collection alternatives, and  “is not a sound basis to provide no information about PPIAs or an effective means for taxpayers to request PPIAs.” 

To be sure, at the conclusion of the report, TIGTA noted that IRS has agreed to add information about PPIAs on the web page and work with the Taxpayer Advocate Service and the Taxpayer Experience Office to explore potential changes to the Form 9465. Those changes would help align with taxpayer rights; it is significant that TIGTA is taking that rights based perspective in its work.

On balance, however, it would be better if IRS were proactively considering these issues from a taxpayer perspective without the need of a TIGTA audit. To that end, see Reducing Administrative Burdens to Protect Taxpayer Rights, a paper that Keith, Nina and I have written that is forthcoming in the Oklahoma Law Review that proposes a more robust and proactive approach to identifying and minimizing burdens that impinge on taxpayer rights.  For those with an interest in collection and tax administration, I recommend reading the whole report. It also discusses IRS performance in reviewing and maintaining taxpayer financial information for those taxpayers who entered into or defaulted into PPIAs and situations where the IRS itself overlooked PPIAs and perhaps improperly put taxpayers in currently noncollectible status.

Avatar photo About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.


  1. Nice post, Les! I’m teaching PPIA today in class and will give this to my students. The TIGTA report does a nice job in looking at the relationship between PPIAs and CNC to make the point that better use of PPIA would benefit both TPs and the Service as compared to use of CNC. TIGTA, however, does not explore ignores transaction costs as between establishing and monitoring PPIA and establishing and monitoring CNCs. It just assumes processing a PPIA is equal to processing a CNC. I am less sure. Regardless, the bigger hole in the TIGTA report is that it pretty much ignores the relationship between Deferred DATC OICs and PPIA. PPIAs are very similar to those kinds of OICs….I would say identical, from the TP point of view.

    • Carl Smith says

      When I litigated the Tucker case a decade ago, the issue raised by the first SO was whether the IRS got more benefit from a PPIA of $X a month for the remaining 9 years on the SOL or the OIC I offered of the same $X installment payments for that period. (At the time, OIC installment payments that extended over 2 years had to be made over the entire collection SOL. Today, that is not the case.)

      One of the IRS arguments the first SO made against the OIC was that the IRS would have higher monitoring costs for the OIC than the PPIA. I thought that answer absurd. I then served the IRS with discovery to ask the IRS to prove the SO’s statement, since an OIC does not require a financial review every two years, un like a PPIA. The IRS response was that each review of a PPIA took so little time that it likely cost only about $50 each time in employee work. I doubted this figure, but I had no ability to challenge it. So, the cost of PPIA financial review was nominal, and I dropped this dispute as unlikely to be accepted in the Tax Court. The second SO (on remand), came up with an alternative argument for rejecting Mr. Tucker’s OIC — that he had dissipated assets — and the Tax Court accepted this in rejecting the OIC. I had pointed out that the OIC was better for the IRS because it gave my client an incentive each month to make the OIC payment, even if financial problems (a temporary loss of job) would make him have to borrow from family. On the other hand, if he was in a PPIA, during a temporary loss of a job, he could simply call the IRS and be put into CNC, and the IRS would not likely inquire of him for years about whether he could make payments again. Thus, I argued, the IRS actually did better by entering into an OIC instead of a PPIA, unless, on the unexpected occurrence of my client making a lot more money sometime during the SOL, the IRS luckily asked my client for a financial statement and found he could pay more. The Manual says that unexpected windfalls like future raises are not to be taken into account when computing the proper amount of an OIC, so this fact was no reason for rejecting an OIC. I even offered a collateral agreement to accompany the OIC providing that the OIC payments increased if the taxpayer’s income rose above a certain level. The SO dismissively rejected my offer of a collateral agreement.

      Since, today, installment payment OICs no longer require payment throughout the remaining SOL, but only for two years (last I looked), I think few taxpayers should seek a PPIA. Rather, they should seek an installment payment OIC if the SOL has more than 2 years to run.

      In any event, the IRS should have studied whether the IRS got more money in the long run from installment agreement OICs than PPIAs from similar taxpayers.

  2. Thanks Bryan. Would a change in circumstances potentially result in different outcomes in PPIA vs DATCOIC?

  3. If Tax Tip 2022-22 issued today is any indication, the IRS hasn’t done anything yet. The PPIA is not mentioned.

  4. I have practiced in this area around 15 years and have seen many instances where taxpayers can obtain the same or better results by using a PPIA over an OIC…. if they can stand making payments over a long period. The threshold for setting up a PPIA seems lower than an OIC, which can be highly scrutinized and often rejected as “not in the best interest of the government” for no good reason. I had a client who for years tried to get an OIC, he was offering typically around $50,000 on an over $400,000 liability, but his OIC was repeatedly rejected because of “soft factors.” We got him on a PPIA for $250 per month, so that assuming his financial situation doesn’t change drastically, he would end up paying a total of about $24,000 over the remaining CSED. The IRS certainly lost out there.

    In addition, the periodic financial reviews of a PPIA are truly disruptive and burdensome. Not so many years ago, ALL of our clients on PPIAs would have their agreements terminated every 2-3 years with the IRS claiming they “did not provide updated financial information” when in fact the IRS had failed to send them a letter requesting it. The IRS may have a much smaller number of PPIAs than full-payment IAs, yet the administration of PPIAs was/is a complete mess. I had a client who was not an OIC candidate because of the equity in his home and his small business. We placed him on a PPIA and he made monthly payments via direct debit. Shortly before Covid began in March 2020, the IRS contacted him to provide financial information, and although we actively cooperated with the agent and provided all requested information, the IRS agent disappeared, the taxpayer’s PPIA was erroneously terminated with no notice and not reinstated, and the IRS did not take any collection action. In late 2021, the taxpayer suffered financial hardship due to Covid and sold his home, yet the IRS had failed to properly lien his home (and one older lien had already expired and not been renewed), so he was able to get the equity out of his home to help pay other debts. Shortly thereafter, $50,000 of his older liabilities expired due to the IRS’s failures. So the IRS would have probably paid off most or all of those older liabilities had it kept him on the PPIA back in 2020, but instead he is now waiting out the other CSEDs and thanking God for this miracle due to the IRS’s failures.

    In my opinion, PPIAs do not need special recognition on Form 965 or IRS websites, because the difference between IAs, PPIAs, and OICs is highly technical and involves a number of complex legal and tax concepts. Rather, the focus should be on the taxpayer’s ability to pay – if the monthly payment is large enough, it will full pay the balance, and if not, it won’t. For smaller payments, the IRS and taxpayers both face the additional burden of reviewing the financial information every 2-3 years (and I agree the cost to the IRS is much greater than $50 when you consider the notices, correspondence, and review of documents). There is certainly an incentive to use an OIC over an IA or PPIA whenever possible, but again, the focus should be on the taxpayer’s ability to pay and weighing the resulting options based on the taxpayer’s personal situation, level of risk, and stamina (e.g., willing to make payments over up to 10 years). This is not something that can be easily boiled down into an IRS announcement.

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