Partial Payment Installment Agreement

Partial payment installment agreement summary:

• A partial payment installment agreement is an arrangement to pay back part of your debt over time. 

• You'll make monthly payments toward your debt and will ultimately pay back less than the full amount you owe. 

• You could enter into a partial payment installment agreement with the IRS for tax debt, or with other creditors as part of a debt settlement program. 

Partial Payment Installment Agreement Definition and Meaning

A partial payment installment agreement or structured payment plan is an agreement to pay back some of your debt through monthly payments over time. Under a partial payment installment agreement, you ultimately pay back less than the full amount you initially owed.

Installment payments spread out the cost of paying a debt over a period of time. For example, you might make monthly payments for three years or five years or some other designated time. 

Normally, if you take out an installment loan or get into an installment plan, your monthly payments are calculated to ensure you pay off your full balance when the repayment term ends. 

With a partial payment installment agreement, your monthly payments are typically based on what you can afford—even though that means you may end up repaying less than your full balance.

Types of Partial Payment Installment Agreements

The IRS offers Partial Payment Installment Agreements to taxpayers who have tax debt but can’t pay the full balance due within the time period the IRS has left to collect. These agreements are intended for people who can’t settle their tax debt in a lump sum and who need a longer time to make full payments than a standard agreement would provide.  

If you enter into a partial payment installment agreement with the IRS, you pay what you can afford until the Collection Statute Expiration Date. That's the designated date when the IRS can no longer collect. Usually, the IRS has 10 years from the date you filed your annual return or the date it was due.

Entering into a partial payment installment agreement can protect you from IRS collection activity during the period the agency has the legal authority to collect on your debt. This type of tax debt relief allows you to avoid asset seizure or wage garnishment.  

You may also be able to enter into a partial payment installment agreement or structured payment plan if you’re participating in a debt settlement program and have unsecured debt with other creditors. Examples of unsecured debt include credit cards, personal loans, and medical debt.

When you create a partial payment installment agreement as part of the debt settlement process, this usually means making payments over time to the debt settlement firm instead of directly to your creditors. 

The debt settlement firm negotiates with your creditors to accept less than the full amount due. When an agreement is reached with your creditor—and accepted by you—the firm pays the creditors the money collected over time from the monthly payments you made.

Key Features of a Partial Payment Installment Agreement 

• If you want to deal with your tax debt using a partial payment installment agreement, you have to apply with the IRS and show that you can't pay what you owe. If your financial circumstances improve, your agreement could change. 

• The IRS allows you to enter into an installment agreement only if you have filed all past due returns. You’ll have to pay your taxes going forward or your agreement may default. 

• When you enter into a partial payment installment agreement as part of a debt settlement program, you make your installment payments to the debt settlement company, which then generally offers a lump sum payment to creditors to settle your debt. 

• A partial payment installment agreement could make paying off your tax debt or other debt easier because you’re paying less than the full amount due.

• Using a partial payment installment agreement to resolve your debt could result in damage to your credit score, but it may also give you the chance to rebuild your credit and financial future by allowing you to resolve your debt problems. 

• You’ll likely be participating in your agreement for several years, with partial payment installment agreements lasting up to 10 years with the IRS and often lasting three to five years as part of the debt settlement process. 

Take time to carefully consider the pros and cons before deciding that a partial payment installment agreement is right for you.