IRS tax form 433-A is formally known as the Collection Information Statement for Wage Earners and Self-Employed Individuals. The IRS requires this document to verify income for payment plans or certain types of relief options.
The 433-A requests detailed information about income, expenses, and assets. The information provided on this form allows the IRS to evaluate a taxpayer’s ability to pay.
Has the IRS requested that you submit Form 433-A? Do you think you need to file this form, but you’re unsure? Are you wondering how to get started? Then, you’re in the right place. In this article, we’ll explain what Form 433-A is, who needs to submit it, and how to fill it out.
Key takeaways
- Form 433-A is a collection information statement for individuals.
- The form asks for detailed financial information on income, expenses, assets, and liabilities.
- You may need to file this form if you apply for payment plans or relief in some situations.
- Use Form 433-A (OIC) if you want to apply for an offer in compromise.
- Work with a tax attorney to ensure you fill out the form correctly.
What is Form 433-A?
Form 433-A is a Collection Information Statement. If you have a revenue officer assigned to your case, they may require you to file this form if you owe over $50,000 and want to apply for an installment agreement. You may also need to file this form if you want to apply for a partial payment installment agreement or currently not collectible status.
However, the IRS may alternatively request Form 433-F in all of the above situations. If you’re applying for a compromise offer, you should file a special version of this form called Form 433-A (OIC).
What is the Purpose of Form 433-A?
The IRS uses this form to assess your collection potential and to determine your eligibility for IRS relief programs. If this form indicates that you can truly not afford to pay your taxes, the IRS may stop collection actions against you or agree to a very low monthly payment. However, if this form shows that you have ample resources to pay your taxes, the IRS may reject your request for payments or a pause in collection actions.
Form 433-A vs Form 433-A OIC
There are two types of IRS Form 433-A, and both have slightly different uses:
- Form 433-A: The IRS Form 433-A is a long-form version of the Collection Information Statement. The IRS can use this form version to determine how much of a person’s tax liability they can afford to pay. This form is significantly longer than Form 433-F.
- Form 433-A OIC: The tax form 433-A OIC is the Collection Information Statement that specifically relates to an offer in compromise. While this version of the form collects information similar to the regular tax form 433-A, it is formatted to calculate a potential settlement amount based on the taxpayer’s financial information.
What’s an Offer in Compromise?
An offer in compromise allows you to settle your tax debt for a lower amount than you owe. It may be an option if you are unable to pay your entire tax debt or if doing so would cause financial hardship.
If you meet the following criteria, you may be eligible for an offer in compromise:
- You filed all necessary tax returns and made all required estimated payments.
- You are not involved in an ongoing bankruptcy proceeding.
- You have a current year return extension (if applying for the current year).
- You are an employer who has made tax contributions for the current and previous two quarters.
To learn more about how Offers in Compromise with the IRS work and how to apply for one, download our free whitepaper, “Demystifying the Offer in Compromise: Understanding the Frequently Misunderstood Tax Liability Solution.”
When Do I Need to File Form 433-A?
The following are the main situations in which you must file tax Form 433-A:
- To make an application for a partial payment installment agreement (PPIA): A PPIA allows you to make monthly payments on your tax debt until the collection statute expiration date, which is usually ten years after the IRS accepts your tax return. The IRS then writes off any outstanding debt.
- If you are personally responsible for a TFRP (trust fund recovery penalty): When businesses fail to pay their payroll taxes, the IRS can hold a number of individuals liable. If you are personally liable for a TFRP, the IRS will request that you complete this form in order for them to assess your collection potential and determine whether it is worthwhile trying to collect the TFRP from you.
- To submit an offer in compromise on an unpaid tax liability: Instead of the standard version of this form, file the 433-A (OIC) for an offer in compromise.
- In some cases, an IRS revenue officer may require you to file Form 433-A to determine your eligibility for specific tax relief programs.
Who Can File Form 433-A
The following taxpayers may be required to complete the 433-A tax form:
- Individuals who owe income taxes as reported on IRS Form 1040.
- Individuals who must pay a Trust Fund Recovery Penalty.
- Individuals personally liable for a partnership liability.
- Individuals who own a disregarded entity, such as a limited liability company.
- Individuals who work for themselves or earn self-employment income.
How to Fill Out Form 433-A
Form 433-A includes seven sections. If you are a wage earner, you will only need to fill out sections 1 through 5. If you are self-employed, you must fill out sections 1 through 7. If you are a wage earner with self-employed income, you will also need to fill out sections 1 through 7.
Here’s a breakdown of how to fill out form 433-A.
Section 1: Your Personal Information
The first section asks for information about yourself and your household. For instance, are you married? Do you own or rent your home? Additionally, you’ll need to include your address, date of birth, Social Security number, and contact information.
Section 2: Your Employment Information (Wage Earners)
This section asks for your employer and occupation information if you are a wage earner. If you’re married, you must also provide information about your spouse’s employment. This section requires:
- Your employer’s information, including name, address, and contact information.
- Your spouse’s employer’s information.
- Your pay period (weekly, monthly, etc.)
If you receive bonus or commission payments, note that these may artificially inflate your income at certain parts of the year. For example, if your company provides an annual Christmas bonus, your December income may make your annual income look much higher if the IRS assumes that your income remains at that level year-round.
This, and situations involving commission payments, may require you to prorate your bonus across the calendar year and attach a document explaining your bonus and commission payment schedule to the IRS. Per the IRS Financial Analysis Handbook, sporadic income–which includes bonuses and commissions–should be divided by 12 to be spread across the year.
Section 3: Other Financial Information
You must include any other relevant financial information in this section. For example, whether you are a beneficiary of someone else’s insurance policy, trust, or will. You will also need to state whether or not you have filed for bankruptcy in the last ten years and, if so, the outcome. Moreover, if you have been involved in any lawsuits, own any foreign real estate, or transferred assets for which you didn’t receive full benefits, this information must be included in section 3.
Section 4: Your Personal Assets
You must summarize all of your personal assets in the third section of IRS Form 433-A. This includes the following:
- Bank Accounts: Include your bank’s name, address, account numbers, and current account balances. You must also include information about how much money is in your checking, savings, and money market accounts, as well as PayPal, Venmo, CashApp, and cryptocurrency. You must also disclose any cash that is not currently in a bank account.
- Investment Assets: Bonds, stocks, mutual funds, annuities, time deposits, IRAs, and 401ks are examples of investment assets that must be included in this section of Form 433-A.
- Credit: Section 3 of Form 433-A requires you to record any available credit, including the name, address, credit limit, current credit card balances, and unsecured lines of credit. This does not include car loans or mortgages.
- Life Insurance: You must also report the cash value of your whole life or universal life insurance policies under Section 3. However, this will not have to be reported if you have a term life insurance policy because that sort of life insurance plan does not accumulate cash value.
- Vehicles: You must include the make, model, model year, mileage, loan balance, purchase date, lender, and monthly payment amount for each car you own, including both leased and purchased vehicles.
- Real Estate: You must include all information regarding your home and real estate properties, including mortgages, home equity lines of credit, and even property appraisals.
- Other: Finally, you can list all of your other personal assets, such as artwork, jewelry, and furniture.
Section 5: Your Monthly Income and Expenses
Sections 6 and 7 should be completed before section 5 if you are self-employed or have self-employment income. If you split expenses or live in a community property state and only one spouse has a tax liability, but both have income, enter the total household income and expenses. If you do not live in a community property and don’t split expenses, mention only the liable taxpayer’s income and expenses.
This section requires:
- Wages, salaries, pensions, and social security information: Wages or salaries you are paid on a monthly basis. Don’t deduct any tax withholdings or allotments taken from wages, such as insurance payments.
- Monthly net income from your business: This is the amount received after paying for standard and required monthly business expenses.
- Your monthly net rental income: This is the amount earned after paying the regular and essential monthly rental expenses.
- Other Income: This includes any other income earned, such as gambling or agricultural subsidies.
- Food, Clothing, and Miscellaneous expenses: One month’s total of food, clothing, housekeeping supplies, and personal care goods.
- Housing and Utilities: This includes your rent or mortgage payment total. Also include average monthly expenses, including maintenance, utilities (such as electricity), and property taxes.
- Vehicle and transportation costs: Including vehicle ownership costs (e.g., loan payments), operating costs (e.g., maintenance and fuel), and public transport (e.g., bus or train costs).
- Health care costs: Your monthly total of out-of-pocket medical expenses, including prescriptions and medical supplies.
- Current year taxes: State and federal taxes withheld from your salary or wages.
This section’s supporting information can be found on pay stubs, copies of alimony or child support checks, and annuity or pension statements.
It’s important to note that the IRS doesn’t generally consider the following as eligible expenses:
- Tuition for private schools
- Public or private college fees
- Voluntary retirement contributions
- Payment on unsecured debts
However, the IRS may approve the expenses if it can be established that they are necessary for the individual’s or family’s health and welfare or for the generation of income.
Collection Financial Standards
This is part of how the IRS uses Collection Financial Standards. National standards include basic amounts for each of the items in this category. You can deduct up to this amount without proving the amount actually spent. However, local standards also apply. You are typically allowed to account for the actual amount spent or the local standard–whichever is less.
If your spending exceeds the permitted amount, the IRS may find the standards inadequate for your situation. You will, however, need to prove your actual spending.
Approaching your excess spending is a little hit and miss–the Taxpayer Advocate Service found that over half of requested excess allowances were denied across several categories. Working with a tax professional may help you prove your excess spending in a way that the IRS allows.
Section 6: Your Business Information
If you are self-employed or earn self-employed income, you must complete sections 6 and 7 of Form 433-A. While you do not have to be in a partnership or incorporated into another business entity, you will still need to complete this section as a small business owner or sole proprietor. This section also includes assets held in your business’ name, including equipment, tools, computers, or real estate.
Section 7: Your Sole Proprietorship Information
Section 7 requires self-employed individuals who work under a sole proprietorship entity to report the gross revenue and receipts of the business. You must also list your business expenses. This includes:
- Materials purchased directly related to your business
- Inventory
- Supplies such as books and office supplies
- Utility costs, such as telephone, gas, and electricity
- Taxes, including real estate and occupational
- Net business income – your net profit from Form 1040
Avoiding Common Errors When Filling Out Form 433-A
When filling out Form 433-A, being honest, complete, and accurate is incredibly important. First, when you sign 433-A, you do so under penalty of perjury. This means that you are swearing that the information provided is accurate and complete to the best of your knowledge. If the IRS finds that you intentionally lied or withheld information, you could possibly face criminal charges.
Proper valuation of assets is an essential part of filling out Form 433-A accurately. If you have a vehicle, you can use resources like Kelley Blue Book to get the current value of your vehicle, accounting for its condition, mileage, and features. Getting a fair appraisal of real estate can be a bit more challenging–you may need to pay for an appraisal or ask for a report from a real estate agent showing comparable properties and their sale prices.
Both of these options cost money. However, guessing at the value of your property can seriously impact your efforts to secure a payment arrangement. If the IRS sees that you have valued assets at zero or seriously undervalued your assets, expect them to go through the rest of your Collection Information Statement in excruciating detail to look for other half-truths. Remember, too, that undervaluing your assets isn’t the only mistake you can make. If you overvalue your assets, the IRS may think you are more capable of paying your tax debt than you truly are, leading to an unnecessary rejection of your application.
Before you submit Form 433-A, review it carefully and look for any mistakes that could result in delays or denials. Verify that all of the personal identifying information you provided is accurate. When reporting your income, debts, and assets, do not round up or down; provide exact numbers whenever possible. Whenever you disclose an asset or debt, ensure you have the documentation to back it up. If the IRS requests more information, you want to be able to provide the documentation needed to support your claims.
IRS Form 433-A FAQs
What is the Difference Between Form 433-A and Form 433-F?
Form 433-A is a detailed document used by wage earners and self-employed individuals to provide financial information to the IRS when filing for an offer in compromise. The IRS uses Form 433-F, a simplified form, to establish a payment plan amount or mark your account as Currently Non-Collectible. The IRS’ automated collections department generally requests Form 433-F, whereas IRS Revenue Officers generally request Form 433-A.
What Do I Need to Attach with the Form 433-A?
You must attach any of the following documentation to Form 433-A that is relevant to your situation:
- A copy of your most recent pay stub.
- A copy of your recent investment and retirement account statements.
- A copy of the most recent statement from all other sources of income.
- Bank statements from the previous three months.
- Each lender’s most recent statement, including payments, balances, and payback amounts.
- Verification of any outstanding state or local taxes.
What Does Self-Employed Mean on the 433-A Form?
Self-employed individuals are the sole members of a business that carries on a trade or service as an independent contractor or sole proprietor. This contrasts with partnerships, multi-member LLCs, and corporations that may need to complete 433-B in this situation.
When Do I Need to Complete Form 433-B?
If you’re applying for tax relief on behalf of a business, you may need to complete Form 433-B. This form is very similar to 433-A, but it’s designed specifically for businesses, including partnerships and corporations.
Where Should I Submit Form 433-A?
Where you mail Form 433-A depends on why you are submitting it and where you are located. For example, if you are requesting a partial payment installment agreement, the address may be different than it is for someone requesting an offer in compromise. Check the mailing instructions for the other forms you submit with your 433-A. You may find it easier to submit via fax instead of mail; you can get immediate confirmation of receipt and avoid a multi-day delay in processing your forms.
Get Help Today
Form 433-A is a six-page document requiring extensive information on income and expenses. Therefore, filing this form can be confusing. However, you must file this form and submit your financial situation in order for the IRS to determine how you can satisfy an outstanding tax liability. This is also required to qualify for certain IRS programs, including a partial payment installment agreement.
Need help? If you have received notification to submit Form 433-A or are unsure if you need to file, call us today at (470) 287-5472 or fill out our consultation form to start taking the first steps toward solving your tax issues. The experienced attorneys at Wiggam Law can help you fill out Form 433-A and help negotiate installment agreement options on your behalf.