Form 433-A is a collection information statement. The IRS uses this form to gather information about your monthly household income, living expenses, business and personal assets, and debts. Then, the IRS uses this information to determine what you can afford to pay on your tax liability and to assess your eligibility for certain tax relief programs.
Need help completing IRS Form 433-A? Want to ensure you’re pursuing the right option for resolving your tax debt? Then, contact us today — fill out the online contact form or call us at (901) 350-4289. At Damiens Law, we are devoted to helping our clients resolve their tax issues in the most optimal way possible. To help you get started, we created this guide to the 433-A.
What Is Form 433-A?
Form 433-A is the Collection Information Statement for Wage Earners and Self-Employed Individuals. You must complete this form if you’re applying for a partial payment installment agreement (PPIA). The IRS also uses this form to determine how much you can afford to pay if you’re liable for a trust fund recovery penalty.
There is another version of this form called the 433-A (OIC). You should complete this form if you’re applying for an offer in compromise.
Both of these forms request very detailed information about your income, expenses, assets, and debts, and you need to ensure that you fill in the forms accurately. Failing to include all of your assets or income may be considered tax evasion. A tax professional can help you.
When to File Form 433-A
Here are the main situations where you need to file tax Form 433-A:
- To apply for a partial payment installment agreement (PPIA).
A PPIA lets you make monthly payments on your tax debt until the collection statute expiration date — generally ten years after your tax return was filed. Then, the IRS discharges any remaining debt.
The IRS only lets people qualify for a PPIA if they cannot afford to pay the tax debt in full or make larger monthly payments. The agency uses the information on this form to assess your ability to pay. Then, it reassesses your situation every two years to determine if you can pay more.
- If you’re personally liable for a trust fund recovery penalty (TRFP).
The TFRP applies when businesses don’t pay their payroll taxes, and the IRS can hold a range of individuals responsible. If you are personally liable for a TFRP, the IRS will ask you to complete this form to assess your collection potential.
- To apply for an offer in compromise on an outstanding tax liability.
An offer in compromise is when the IRS agrees to let you pay off your tax debt for less than you owe. Again, the IRS won’t settle tax debts unless you prove that you cannot afford to pay the tax liability by filing a collection information statement. For an OIC, file the 433-A (OIC) instead of the standard version of this form.
In some cases, the IRS may require you to file Form 433-A to see if you qualify for certain tax relief programs. You should never hide information from the IRS, but if you’re uncomfortable with the request, you should reach out to a tax professional.
At Damiens Law, we work very closely with our clients, providing them with individualized attention and services. We can help ensure that the IRS collection agent respects your rights and help you find the best relief option for your situation.
How to Complete: Form 433-A Instructions
Form 433-A requests details about nearly every aspect of your finances. Set aside plenty of time to complete this form, and be aware that you may need to really dig into your financial records to find the information you need. Here is an overview.
- Contact Details and Wage Information
The first two sections of Form 433-A are self-explanatory. For section one, you need your contact details, Social Security Number, and date of birth. You also need your driver’s license number and details about your spouse and dependents.
Then, in section two, you note your employment information including your employer, pay dates, and withholding information. If you’re self-employed, you can skip this section.
- Other Financial Information
Section three of IRS Form 433-A asks questions about the following:
- If you’re currently party to a lawsuit.
- If you’ve ever filed for bankruptcy.
- If you’ve lived outside the United States for more than six months or longer in the last decade.
- If you’re the beneficiary of a trust, estate, or life insurance policy.
- If you have a safe deposit box.
- If you’ve transferred business or personal assets for less than their fair market value in the last 10 years.
You need to attach supporting documents related to these questions when you file.
- Personal Asset Information
Section four of Form 433A asks for detailed information about your personal assets. You must disclose all of your assets, including bank accounts, money market accounts, investments, life insurance policies with cash value, real estate, vehicles, and virtual currency.
You also have to list the value of your furniture, art, jewelry, and collectibles and any intangible assets you own.
The form requests the fair market value and the outstanding loan balance on all of your personal assets. You also need to note account numbers, addresses of financial institutions, and other details as requested. For instance, when you list the value of your virtual currency, you have to include the email address you used when you set up the wallet or exchange.
- Monthly Income
In section five, the IRS requires you to note your monthly income and expenses to determine how much you can afford to pay each month. This is the last section for wage earners. If you’re self-employed, you also need to complete sections six and seven, and you need to do them before this section.
You must note all your income sources, including wages, dividends, net rental income, business income, pensions, distributions from retirement accounts, Social Security payments, child support, alimony, and any other income you receive. Then, you should list all of your expenses. The difference is your disposable income. Generally, the IRS expects you to spend all of your disposable income on your tax debt.
- Actual Vs. Allowable Amounts for Health Insurance Premiums and Other Expenses
In the expense section, Form 433-A has two columns: actual and allowable. Fill out the actual monthly expenses column with the expenses you pay every month. When the agent reviews your application, they will note the allowable expenses based on the IRS’s collection financial standards.
It’s important to note that the IRS doesn’t necessarily accept every expense as necessary. Generally, the agency will not allow you to include private school tuition, college expenses, charitable contributions, voluntary retirement contributions, or credit card payments. However, the IRS may allow these expenses if you convince the agency that they’re necessary for the welfare of your family or to earn a living.
The agency has specific guidelines for how much taxpayers should spend on food, housing, transportation, and other expenses. These are called the IRS’s collection financial standards. Some amounts are the same for everyone, while other expenses, such as housing, vary based on where you live.
If your expenses exceed the limits, the IRS may not allow you to include those expenses unless you have a good explanation of why you need to spend more than the threshold.
For example, as of 2023, the IRS expects people under age 65 to spend $75 on out-of-pocket medical expenses and people over 65 to spend $153. If your monthly expenses exceed the threshold, you need to explain why.
- Business and Sole-Proprietorship Information
Sections six and seven request details about your business if you’re a sole proprietor. If you’re self-employed or an independent contractor, you are considered a sole proprietor. If your business is a partnership or a corporation, you should complete Form 433-B instead of filling out these sections.
You must include basic details about your business, such as its name, type, employer identification number (EIN), address, and website. You also need to list your payment processing accounts and the merchant account that you use to process credit cards. Then, you need to disclose how much cash you have on hand and list your business bank accounts.
You also need to include details about accounts receivables and the equity in your business assets. Finally, you need to create a detailed list of your business income and expenses corresponding to the information on your profit and loss report.
How to Complete Form 433-A OIC
As noted above, if you’re applying for an offer in compromise, you need to use a special version of this form called the 433-A OIC. The OIC version of this form requests the same details as the original version but in a slightly different order.
The 433-A OIC is also two pages longer than the standard version of the form, and it requests a few additional details, including the following:
- In the personal information section, you need to list all the people who live in your home. Also note their relationship to you, if you claim them as a dependent, and whether or not they contribute to your household income.
- The OIC form requires an additional calculation for personal and business assets aside from cash, cash equivalents, and life insurance policies with cash value. Multiply the fair market value of the asset by 0.8 and subtract the amount you owe. Then, note the difference to the side.
- When you fill out your monthly income and expenses, you should note the national standard for out-of-pocket health care expenses (line 45) and food, clothing, and misc expenses (line 39), even if you spend less than this amount. For all other expenses, note the actual amount that you pay.
- On the last page of the OIC form, make your settlement offer. This is the amount that you are offering to pay so that the IRS will eliminate the remaining balance. You add up the value of your assets as calculated on the form. Then, you add in 12 months of disposable income if you plan to pay in a lump sum or 24 months of disposable income if you want to pay over a two-year period. The total is your offer.
If you want to make an offer that is less than the amount calculated based on the information on the form, you will need to provide the IRS with a written explanation of why. Even though this version of the form doesn’t show a column for IRS allowable expenses, keep in mind that the IRS refers to these standards when reviewing your application.
Tax Form 433-A: Beyond the Numbers
As explained above, both versions of tax form 433-A require a lot of numbers. Although it’s intense, that part of the form is relatively self-explanatory. However, you may need to go beyond the numbers. This requires strong knowledge of the tax code.
In particular, if you apply for an offer in compromise and make an offer that is less than the amount calculated on the form, you will need to include a written explanation of why the IRS should accept your offer. You do this in section three (reason for offer) of Form 656-B (Offer in Compromise Booklet).
In some cases, you may need to apply for effective tax administration. This is when you could afford to pay more, but forcing you to do so would be inequitable.
If you apply for a partial payment installment agreement (PPIA), you also must provide a written explanation if your business income is substantially different this year than the last.
How to file Form 433-A
The address where you should send this form varies. If you’re working with an IRS agent, they can let you know where to submit the form. If you’re applying for an offer in compromise or a PPIA, the address may be on the other forms that you fill out.
Other 433 Collection Information Statements
The 433-A and 433-A (OIC) are not the only forms the IRS uses to collect information about your finances. The agency also uses the following forms:
- Form 433-F (Collection Information Statement) — A three-page long form typically requested if you apply for a payment plan on over $50,000 in tax debt or if you can’t afford to make the IRS’s minimum monthly payment.
- Form 433-B (Collection Information Statement for Businesses) — A six-page form used to assess the collection potential of partnerships, multi-member LLCs, and corporations.
- Form 433-B (OIC) — A six-page form for businesses applying for an offer in compromise.
To avoid processing delays, make sure that you file the correct forms with the IRS. Although all of these forms are relatively similar, they have nuanced differences in the information that the IRS wants to collect.
Get Help With Tax Problems Today
Dealing with the IRS can be extremely complicated and frustrating. Often, when taxpayers handle these issues on their own, they end up paying more than they should because they don’t understand the tax code or the available options.
When you work with us, we help you understand the options for your situation, and we ensure that you get the best arrangement possible. To get help now, contact us today. We’ll start with a conversation about your tax problems. Then, we’ll make a plan to resolve them as quickly and painlessly as possible.