THE IRS FORM 433

Tax debt is nothing to look over, especially when you owe a huge amount. If you cannot afford your tax debt, the IRS must decide if and also a perfect way for you to settle your debt.

The IRS uses tax forms such as Form 433-A or Form 433-F to decide or determine is in the future of the taxpayer.

The IRS Form 433-A, which is formally named the “Collection Information Statement for Wage Earners and Self-Employed Individuals”, is a document that the IRS demands in some conditions where an individual owes Federal income tax that he or she cannot pay in full. If a taxpayer fills Form 433-A, the IRS obtains detailed, current financial information about the taxpayer.

The IRS Form 433-A is used for both those that are self-employed and those who earn wages. The IRS requests for Form 433-A (OIC) and 433-B for businesses in the case of an Offer for Compromise.

WHAT IS AN OFFER FOR COMPROMISE?

The Internal Revenue Service (IRS) is ready and willing to work with taxpayers who come up short at tax time. The use of the offer in compromise (OIC) initiative  is one of a few advantageous possibilities taxpayers have to work things out with the IRS to resolve any tax dispute.

An Offer in Compromise (OIC) is a way for a taxpayer to resolve his or her debt for less than the amount that you owe, which is agreeable to the IRS if you meet certain stated requirements. The OIC is a legitimate option if a taxpayer cannot pay his or her full tax liability, or if by doing so or trying to do so creates a financial hardship. The decision will depend on the taxpayer’s unique circumstances such as Income, Expenses, how much equity you have in various assets, and how much of the debt the IRS thinks that the taxpayer will be able to pay.

There is no assurance that the IRS will accept your Offer in Compromise (OIC) application. The IRS considers several factors or conditions to approve the offer in compromise (OIC) to the taxpayer. However, the IRS might approve your proposal if there’s some issue as to whether you can genuinely owe the tax. This situation falls under the umbrella of “Doubt of Liability”.

The IRS might also approve your offer in compromise (OIC) application if – based on your submitted records that shows your present financial situation – It appears highly improbable that you’ll ever be able to pay off the tax obligation entirely. In this case, when your income and value of assets is calculated, it could amount to less than what you owe. This situation is referred to as “Doubt of Collectability”.

Lastly, you might be approved if “your complete payment would either create an economic hardship or would be unfair and inequitable because of some egregious circumstances”, according to the IRS. This hardship will apply even if there’s no dispute that the taxpayer owes the tax and if his or her income and assets exceed the debt.

The taxpayer’s offer will be declined if he or she is qualified for one of the installments agreements. In this case, the IRS figures that the taxpayer has enough resources to pay off his or her debt fully over time.

If a taxpayer is having or showing interest in applying for an offer in compromise (OIC), he or she will need to complete Form 433-A (OIC). This Form is included in the IRS Form 656 Booklet, which is used to submit a personal offer in compromise to the IRS. It requires much of the same detailed information as Form 433-A, but is geared specifically to get information for the IRS to consider an OIC.

FORM 433-A;

Any individual that is interested to be considered for the offer in compromise (OIC), has to complete the IRS 433-A Form. The taxpayer must complete the first four sections of Form 433-A. Form 433-A requires that individuals provide proper documentation of their incomes, assets, and expenses for the previous three (3) months when completing the form. This is subdivided into;

Section 1: Personal Information.

This segment requires the personal information of the taxpayer and his or her household. For example, Date of birth, Marital Status, Social Security number, Address, Contact Information (e.g. Phone number, Email Address etc.)?

 

Section 2: Employment Information.

This section requests for information about your occupation and employer. In this section you can also indicate if you are self-employed, how long you have been in the job, your job description, Salary and bonuses. If the taxpayer is married, he or she must indicate here and also provide the required information for his or her partner.

Section 3: Other Financial Information.

This section requires the individual to provide other financial information, including documentation where requested. For instance, this section is interested to know if the recipient is a part of a lawsuit, or if the individual is a beneficiary of a trust, estate, or life insurance policy. The purpose of this section is to help the IRS find out whether the individual has any source of assets or future income with which he or she can fully pay for the outstanding tax debt.

Section 4: Personal Asset Information for all Individuals.

Section 4 requires the individual to provide the IRS with detailed information about any personal assets, such as vehicles, real estate, bank accounts, and investments and landed properties.

This section also requires the taxpayers to complete a monthly income and expense statement, which sets up a side-by-side comparison of his or her income and living expenses for the IRS to evaluate. Lastly the taxpayer must sign at the end of section 4, and certify under the penalties of perjury that the information provided in the form is correct. If the tax is owed jointly, both husband and wife must sign the form.

Section 5 and 6: Business Information and Sole Proprietorship Information:

The individual needs only complete sections 5 and 6 of Form 433-A, if he or she is self-employed. Section 5 requests detailed information about the taxpayer’s business, including the balances of business bank accounts, outstanding accounts receivable, and other business assets. Section 6 requires the individual to give an accounting of gross monthly business income and expenses, to illustrate the current financial status of the business and measure its profits in a form 433¸ if there is any.