Drowning in tax debt can feel overwhelming. You want to pay what you owe, but the balance feels impossible to clear. If you’re in New York and struggling with IRS debt, you have options beyond standard payment plans.
One solution that works for many taxpayers is a Partial Payment Installment Agreement (PPIA). This program lets you make monthly payments you can actually afford, and when the IRS’s collection period expires, you walk away without paying the full balance.
At John D’Amato, PLLC, attorney John D’Amato has helped numerous New York taxpayers resolve complex IRS debt situations through PPIAs and/or other tax resolution strategies. With decades of experience handling bankruptcy and IRS solutions, his firm understands the specific challenges New York residents face when dealing with federal tax debt.
What Is a Partial Payment Installment Agreement?
A Partial Payment Installment Agreement is a payment plan where you make monthly payments to the IRS based on what you can afford. Unlike standard installment agreements, where you pay the full balance, a PPIA ends when the IRS’s collection period expires.
The IRS Internal Revenue Manual (IRM) section 5.14.2 defines PPIAs as agreements established when financial analysis shows a taxpayer cannot satisfy their tax liability within the Collection Statute Expiration Date (CSED).
Here’s how it works in practice: Say you owe $40,000 in back taxes and the debt expires in six years. You can only afford $250 per month. With a PPIA, you pay $250 monthly for six years (totaling $18,000), and the IRS writes off the remaining $22,000 when the statute expires.
According to the IRS 2024 Data Book, the agency collected more than $16 billion through installment agreements in fiscal year 2024, a 12% increase from the prior year. More taxpayers are using payment plans to settle their debts over time rather than facing aggressive collection actions.
Understanding the Collection Statute Expiration Date
The CSED is critical to understanding how PPIAs work. This date marks the last day the IRS can legally collect your tax debt.
Under 26 US Code section 6502, the IRS generally has 10 years from the assessment date to collect taxes. Once this period expires, the debt disappears.
Several actions can extend this 10-year period:
- Filing an offer in compromise
- Requesting a Collection Due Process hearing
- Filing for bankruptcy
- Living outside the United States for six months or more
- Requesting innocent spouse relief.
When you apply for a PPIA, the IRS may ask you to extend the CSED, especially if you own assets that will mature or increase in value after the expiration date. Never agree to extend the CSED without consulting a tax attorney. This decision can add years to your debt and cost you thousands.
Who Qualifies for a Partial Payment Installment Agreement?
Not everyone qualifies for a PPIA. The IRS uses strict criteria to determine eligibility. You might be a good candidate if:
- You owe more than you can pay before the CSED
- Your monthly expenses leave little disposable income
- You cannot qualify for an Offer in Compromise
- You were recently denied the Currently Not Collectible (CNC) status, OR
- You have liquidated available assets or cannot access equity in existing assets.
The IRS Taxpayer Advocate Service explains that PPIAs allow you to pay a monthly amount based on what you can afford after essential living expenses. The IRS determines affordability using national and local expense standards.
Financial Requirements and Documentation
The IRS scrutinizes your finances before approving a PPIA. You must prove you cannot pay your full tax debt within the collection period.
If you’re an individual taxpayer, complete Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals). Businesses use Form 433-B.
These forms require detailed information about:
- Monthly income from all sources
- Monthly living expenses
- Assets, including real estate, vehicles, and investments
- Bank account balances
- Retirement accounts
- Business assets and income
- Outstanding debts and obligations.
The IRS uses national standards for food, clothing, and personal care items. They use local standards for housing, utilities, and transportation costs in your area of New York.
If your income decreased by 20% or more since your last tax return, the IRS will require income verification such as recent pay stubs, profit and loss statements, or bank statements.
We at John D’Amato, PLLC help New York clients gather and present this documentation correctly. Small errors or missing information can delay approval or result in denial. Our firm’s attention to detail ensures applications meet IRS requirements the first time.
The Asset Question
One common misconception is that you must liquidate all assets before qualifying for a PPIA. While the IRS expects you to use available equity, exceptions exist.
According to IRM 5.14.2.2.2, you may retain assets if:
- You lack sufficient equity to borrow against them (generally, at least 20% equity required)
- You cannot access the equity legally
- You need the asset to produce income
- Selling would cause financial hardship, OR
- You cannot qualify for a loan due to insufficient income.
For example, if you own a home jointly with your spouse in New York and your spouse refuses to agree to a home equity loan, you may qualify for a PPIA without borrowing against the property.
The IRS will evaluate each asset separately. A revenue officer may determine certain assets should be levied while allowing you to keep others necessary for earning income or basic living.
How PPIAs Compare to Other Options
New York taxpayers facing tax debt have several resolution options. Understanding the differences helps you choose the best path.
PPIA Versus Standard Installment Agreement
A standard installment agreement requires you to pay the full tax debt within 72 months or before the CSED, whichever comes first. According to IRS Topic 202, taxpayers owing $50,000 or less may qualify for streamlined agreements with minimal financial disclosure.
PPIAs allow lower monthly payments because you only pay what you can afford. However, they require extensive financial documentation and take longer to process. The IRS also reviews your financial situation every two years with a PPIA, which does not happen with standard agreements.
PPIA Versus Offer in Compromise
An Offer in Compromise (OIC) settles your debt for less than you owe through a lump sum or short payment period. The IRS 2024 Data Book shows the IRS accepted 7,199 offers totaling $163.4 million in fiscal year 2024 out of 33,591 proposals.
PPIAs are generally easier to obtain than OICs. The application process is faster, typically taking 30 to 60 days compared to five to nine months for an OIC. You can make smaller monthly payments with a PPIA instead of a lump sum.
The downside? The IRS reviews your PPIA every two years. If your income increases, your payment amount may increase. With an OIC, once accepted and paid, the debt is settled permanently as long as you remain compliant for five years.
PPIA Versus Currently Not Collectible Status
Currently Not Collectible (CNC) status is when the IRS determines you cannot pay anything toward your tax debt without suffering financial hardship. Under IRM 5.16.1, the IRS temporarily stops collection actions but continues assessing interest and penalties.
CNC status offers more relief than a PPIA if you truly cannot afford any payment. The IRS does not require monthly payments. However, the IRS may file a tax lien against you and will seize any future tax refunds.
If you can afford some amount of monthly payment, a PPIA is often better than CNC because you demonstrate a good-faith effort to pay. This can prevent additional collection actions and may satisfy state licensing boards or creditors who require you to address tax debts.
For New York taxpayers, attorney John D’Amato can analyze your specific situation to determine whether a PPIA, CNC status, or another option best serves your interests. His experience with both bankruptcy and tax law provides unique insight into how different strategies affect your overall financial picture.
The Application Process
Applying for a PPIA requires careful preparation. Here are the steps:
Step 1: File All Required Tax Returns
You must be current with all filing obligations. The IRS will not consider a PPIA if you have unfiled returns. If you need help filing past-due returns, address this first.
Step 2: Complete the Required Forms
Start with Form 9465 (Installment Agreement Request). On line 11a, enter the monthly payment amount you can afford.
If this amount will not pay the full debt by the CSED, include a note explaining you want to be considered for a Partial Payment Installment Agreement. Then complete Form 433-A or Form 433-B with detailed financial information.
Step 3: Gather Supporting Documentation
Collect documents that verify your financial situation. These can include:
- Recent pay stubs or profit and loss statements
- Bank statements from the past three months
- Mortgage statements or lease agreements
- Car payment records
- Insurance premium statements
- Medical expense receipts if significant
- Credit card statements showing minimum payments
- Property tax bills
- Utility bills.
Step 4: Make Your First Payment
Consider making a voluntary payment with your application. This shows good faith and proves you can afford the proposed payment amount. Include the user fee for setting up the installment agreement, typically $225 or $107 for direct debit arrangements.
Low-income taxpayers may qualify for reduced or waived user fees. Under IRS guidelines, if your adjusted gross income is at or below 250% of the federal poverty level, you may be eligible for a fee waiver or reimbursement.
Step 5: Submit Your Application
Mail your completed forms and documentation to the address listed in the Form 9465 instructions. If you owe a significant amount, a revenue officer may be assigned to your case.
Continue making voluntary monthly payments while waiting for approval. This demonstrates commitment and prevents additional penalties.
Step 6: Respond Promptly to IRS Requests
The IRS may request additional information or documentation. Respond quickly and completely. Missing deadlines can result in denial.
According to the IRS instructions, you should receive a response within 30 days. If you do not hear back within a month, contact the IRS directly.
Living With an IRS Partial Payment Installment Agreement
Once approved, your PPIA comes with specific obligations and periodic reviews:
Ongoing Requirements
You must:
- Make all monthly payments on time
- File all future tax returns by the deadline
- Pay any new taxes owed in full
- Remain current on estimated tax payments if self-employed.
Missing a payment can trigger default. If you default, you may incur an $89 reinstatement fee or lose your agreement entirely. The IRS may then resume aggressive collection actions including wage garnishments and bank levies.
Biennial Reviews
The IRS reviews your financial situation every two years. You will receive a request for updated financial information. Respond promptly with current income and expense documentation.
If your income increased significantly or expenses decreased, the IRS may require higher monthly payments. If your financial situation worsened, you may qualify for lower payments or CNC status.
Be honest during these reviews. The IRS cross-references your income information with tax returns and third-party data. Inconsistencies can result in termination of your agreement.
Federal Tax Liens
The IRS may file a Notice of Federal Tax Lien even if you have an approved PPIA. A lien protects the government’s interest in your property. It becomes public record and can affect your credit, your ability to sell property, and your ability to obtain loans.
In fiscal year 2024, the IRS collected nearly $77.6 billion through enforcement efforts, an increase of 13.6% over the previous year. The agency uses liens as one tool to protect its collection rights.
Refund Seizures
The IRS will automatically apply any tax refunds to your outstanding balance while your PPIA is in effect. This happens even if you make your monthly payments. Plan accordingly and adjust your withholding to avoid large refunds.
Special Considerations for New York Residents
New York taxpayers face unique challenges when dealing with federal tax debt.
State Tax Considerations
While a PPIA addresses federal tax debt, you may also owe New York State taxes. The New York State Department of Taxation and Finance operates separately from the IRS with its own collection procedures.
New York State offers similar programs, including installment agreements. However, approval criteria differ. You may need separate agreements for federal and state debt.
John D’Amato, PLLC handles both federal and state tax matters for New York clients. Coordinating resolution of federal and state debts prevents you from solving one problem while another spirals out of control.
Professional Licensing
New York professionals, including attorneys, doctors, real estate agents, and accountants, may face licensure issues when owing back taxes. Some licensing boards require disclosure of tax debts or may discipline licensees with unresolved tax problems.
A PPIA demonstrates you are addressing your tax debt responsibly. This can help maintain professional licenses while resolving your financial situation.
Cost of Living
New York has some of the highest living costs in the nation, particularly in New York City and surrounding areas. The IRS uses local standards that account for regional cost differences.
For housing and utilities, the IRS allows higher expenses in high-cost areas. This can work in your favor when proving you cannot afford large monthly payments. However, you must still provide accurate documentation of actual expenses.
Common Mistakes to Avoid
Several errors can derail your PPIA application or cause problems after approval:
Underestimating Income
Report all income sources accurately. The IRS has access to income information from employers, banks, and other third parties. Discrepancies will be discovered during review. In your declaration, include:
- Wages and self-employment income
- Rental income
- Investment income
- Retirement income
- Social Security benefits
- Disability payments
- Alimony received
- Side gig income.
Overestimating Expenses
While you want to show limited ability to pay, exaggerating expenses backfires. The IRS verifies expenses and compares them to national and local standards. Common areas where taxpayers inflate expenses include:
- Dining out and entertainment
- Cable and streaming services
- Cell phone bills for multiple lines
- Vehicle expenses for luxury cars
- Charitable contributions.
Be realistic and provide documentation for significant expenses.
Ignoring Asset Equity
Failing to address asset equity can result in denial. If you own property with significant equity, explain why you cannot access it or why liquidation would cause hardship.
For example, if you own a home worth $300,000 with a $280,000 mortgage, your equity is only $20,000. After closing costs, you might net very little or nothing. Document this clearly.
Missing the Two-Year Review
When the IRS requests updated financial information for the biennial review, respond immediately. Missing this deadline can terminate your agreement and restart aggressive collection.
Set a reminder on your calendar for 22 months after approval to prepare for the upcoming review. Gather updated documentation in advance.
Agreeing to CSED Extensions Without Counsel
The IRS may ask you to extend the collection statute when negotiating a PPIA. This gives them more time to collect and can cost you thousands in additional payments.
Never agree to extend the CSED without consulting a tax lawyer. Attorney John D’Amato evaluates whether an extension serves your interests or whether alternative strategies would be better.
The Role of Professional Representation
Successfully obtaining and maintaining a PPIA requires understanding IRS procedures, collection standards, and negotiation strategies.
Why Experience Matters
The IRS reviews thousands of PPIA applications. Revenue officers know what supporting documentation should look like and what raises red flags.
John D’Amato, PLLC has helped numerous New York clients navigate the PPIA process and/or the collection process. Attorney John D’Amato understands how to present financial information to meet IRS requirements while maximizing your chances of approval.
His background in both bankruptcy and tax law provides a comprehensive view of debt resolution strategies. Sometimes a PPIA is the best option. Other times, an OIC, CNC status, or even bankruptcy may better serve your long-term interests.
Negotiating Better Terms
Experienced representation can result in lower monthly payments or protection of assets you might otherwise lose. A tax attorney knows which expenses the IRS typically allows and how to justify expenses above the standard amounts.
At the D’Amato office, we also know when to push back against IRS demands. For example, if the IRS asks you to liquidate assets that would cause genuine hardship, our attorney can explain why this should not be required and cite relevant IRM provisions.
Handling Complications
PPIAs can become complicated when:
- You owe both individual and business taxes
- Responsible party assessments are involved
- You face criminal tax issues
- Bankruptcy is a consideration
- State taxes complicate your situation
- You have foreign income or assets
John D’Amato, PLLC handles complex tax situations regularly. Clients throughout New York State trust the firm to resolve challenging IRS debt problems.
Real Results for New York Taxpayers
John D’Amato, PLLC has a proven track record of helping New York residents resolve tax debt and regain financial stability.
One client from Buffalo said, “John made us feel very comfortable with his answers to our questions about converting from Chapter 13 to Chapter 7. He proved to us how it was better to get the Chapter 13 dismissed and then refile to Chapter 7. The fees were a lot less than our first Chapter 13 attorney’s fees. All of our meetings with John were in a relaxed atmosphere and made us feel very comfortable.”
Another client shared, “John and Margaret were always there for me. John always treated me with respect and professionalism. It was a very stressful time for me, and he always made me feel comfortable. I can’t thank him enough for giving me this fresh start. I have my life back, and it’s a wonderful feeling.”
These testimonials reflect the firm’s commitment to not just resolving tax problems but doing so in a way that respects clients and provides genuine relief from financial stress.
Take Control of Your Tax Debt Today. Call John D’Amato.
If you are struggling with IRS debt in New York, you have options. A Partial Payment Installment Agreement may allow you to make affordable payments and eventually settle your debt for less than you owe.
John D’Amato, PLLC is a top-rated tax resolution and bankruptcy law firm serving clients throughout New York State. Attorney John D’Amato brings years of experience helping individuals and businesses resolve complex IRS debt situations.
Do not wait for the IRS to garnish your wages or levy your bank account. Take action now to protect your finances and your future.
Call John D’Amato, PLLC today at (716) 703-9099 for a consultation. Our team will review your situation, explain your options, and help you choose the best strategy to resolve your tax debt.
Whether you need a Partial Payment Installment Agreement, Currently Not Collectible status determination, an Offer in Compromise, or other tax resolution services, John D’Amato, PLLC provides the experienced representation you need.Your fresh start begins with one phone call: (716) 703-9099.