The IRS tax form 433-A, formally known as the Collection Information Statement for Wage Earners and Self-Employed Individuals, is a document required by the IRS in certain circumstances. The information provided on this form allows the IRS to evaluate how much a taxpayer can afford 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.
What is Form 433-A?
Form 433-A is a Collection Information Statement. The IRS requires you to use this six-page form to document your financial situation when you request an offer in compromise or apply for a partial payment installment agreement (PPIA). The IRS then uses the information to establish your “reasonable collection potential” on your tax debts.
What is the Purpose of Form 433-A?
When an individual applies for an offer in compromise, IRS form 433-A is used to determine the “reasonable collection potential” of their tax debts. The form is six pages long and includes detailed financial questions to assist in determining a settlement amount that still allows the taxpayer to meet their basic living expenses.
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 version of the form 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.
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 you filed 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.
- 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)
If you are a wage earner, this section asks for your employer and occupation information. 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.)
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. This includes both leased and purchased vehicles.
- Real Estate: You are required to 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.
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
- 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
What is the Difference Between Form 433-A and Form 433-F?
Form 433-A is a detailed document used to provide financial information to the IRS by wage earners and self-employed individuals 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.
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?
Individuals who are self-employed 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.
Get Help Today
Form 433-A is a six-page document that requires extensive information regarding your 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 (404) 233-9800 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.