The Importance of Properly Filling Out Form 433-A

As stated in “Tax Debt Relief Through an Offer in Compromise”, it is highly crucial that the information on Form 433-A is completely accurate. If there is wrong or omitted information on the form, your chances of the IRS approving your Offer in Compromise will drop.

A six-page form, Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) is used by the IRS to get a clear picture of your financial situation so they can determine the best amount and way to satisfy the taxes owed, also known as “reasonable collection potential”.

Breakdown of Form 433-A

Section 1: Personal and Household Information

This section is pretty straight-forward. Fill out your name, date of birth, social security number, home address and whether you rent or own your home. This section also asks for any dependents you might have, their relationship to you, age and if they contribute to the household income.

Section 2: Employment Information for Wage Earners

In this section you will out information about you and your spouse’s current employment. Like your employer’s name, your occupation and address.

*if you also get self-employment income in addition to wage income from an employer, make sure to fill out Sections 4-6 as well.

Section 3: Personal Asset Information

Here you will enter the most current information on all of your financial accounts and investments, both domestic and foreign – this includes IRAs, 401(k), stocks, bonds, mutual bonds and so on. You Will also enter an real estate you own or are buying, and any cars, boats and/or motorcycles that you own or are leasing.

*For the vehicle information it would be a great idea to provide a report showing the fair market value so the IRS knows the current condition of your car and how much it’s truly worth. The Kelley Blue Book is a great source for such reports.

Section 4: Self-Employed Information

If you are self-employed it is in this section where you will enter the name of your business information like name, address, phone, website, the EIN (Employer Identification Number), average gross monthly payroll, etc.

Section 5: Business Asset Information (For Self-Employed)

Enter your list of business assets which include any business accounts, equipment, car and real estate property that is rented and/or owned.

Section 6: Business Income Expense Information (For Self-Employed)

Enter your business monthly income and monthly expenses, using you current profit and loss statement or if the amounts have not changed significantly you can use the amounts claimed on your most recent Schedule C.

Section 7: Monthly Household Income and Expense Information

Here you will ender you and your spouse’s monthly income which includes your wages, any social security, pension and other source of income. You will also include an adjusted monthly expense for:

  • Food and clothing
  • Rent/Mortgage and utilities
  • Car loan or lease payments, including the cost that it takes to operate like gas and maintenance
  • Health Insurance and any out-of-pocket healthcare supplies like medication or eyeglasses
  • Any alimony or child support payments
  • Child care costs
  • Life insurance premiums
  • Federal, state, local and property tax payments
    • You will then have to add up all of your expenses and subtract it from your monthly income so you can determine what amount you can pay monthly to the IRS.

      Section 8: Calculate Your Minimum Offer Amount

      In this section you will determine the minimum amount that you can pay every month until to be able to pay off your tax delinquency. If you offer an amount too low and the IRS determines through your financial information above that you can pay more, they will deny your request for an Offer in Compromise – contact a tax attorney to help you determine a reasonable amount that will be sufficient enough to comply with the IRS.

      Section 9: Other Information

      This is additional information needed by the IRS to determine your qualification for the Offer in Compromise. *Note that if you are currently in bankruptcy, your application will be automatically denied.

      Section 10: Signatures

      You and your spouse will sign and date the form.

      Once your information has been filled out, make sure to add the corresponding copies of attachments that must go along with Form 433-A. The Form 656 Booklet has a checklist attached to make sure that all the proper steps are taken when filling out the form. It is advised to seek the help of a tax attorney to help you with your Offer in Compromise application in case you have any doubts or questions regarding any of the sections.