Building a Better Payment Plan with Form 433 A
Form 433 A – Collection Information Statement for Wage Earners and Self-Employed Individuals
Who needs a Form 433 A?
IRS Form 433 A is the “Collection Information Statement for Wage Earners and Self-Employed Individuals.” The IRS requires self-employed or employed individuals who owe federal Income tax that cannot be paid in full to submit this form. Joint filers who owe unpaid taxes must also complete the form. It is the first step toward developing a payment plan or resolving an unpaid federal income tax bill for taxpayers with a federal tax debt so that the IRS can evaluate the request or situation in order to determine how to collect the unpaid tax amount.
What is Form 433 A for?
The IRS uses Form 433 A as a way to collect information on individuals who owe taxes. It’s basically a financial statement where a taxpayer lists personal property, assets, bank accounts, employment information, and other personal information. The IRS uses the detailed financial information supplied on the form to determine if there is sufficient income to support monthly payments through an installment agreement with the IRS. It also helps the IRS determine what assets are available to be levied or if an Offer in Compromise is a better option. (Based on their determination, the IRS may choose an Offer in Compromise for an individual who owes federal income taxes and qualifies for a settlement amount that is less than the total amount due, in order to clear the debt.)
Once the IRS calculates a taxpayer’s excess income, they determine the feasible amount a taxpayer has available to pay off their tax debt. The form includes national and local expense standards that limit the amount a taxpayer can claim for various expenses they list on the form. After considering all the information on Form 433A, the IRS may provide a temporary delay in the collection process due to hardship, but will add interest and penalties to the outstanding tax debt. The information provided on this form is valid for 12 months.
Is Form 433 A accompanied by other forms?
• If you own a business, the IRS requests that you submit Form 433-B along with 433-A to report financial information pertaining to your business. Both forms require that you attach various personal documents that verify and substantiate the information you have entered on these forms.
• Attach a Form 2848 Power of Attorney, if you would like your attorney, CPA, or qualified representative to represent you. This will allow that individual to receive and inspect your confidential tax information.
• Also, attach a copy of your last Form 1040 income tax return with all schedules and attachments.
• A list of applicable attachments is listed on the form. These are not IRS forms. You are also required to attach lists and explanations that detail totals that you have entered on the forms that are suggested throughout the form.
• If you cannot pay the Offer Amount that you calculate in Section 8 of Form 433A, then you can submit an explanation on Form 656, Offer in Compromise, Section 3.
When is Form 433 A due?
When a taxpayer has a debt that they doubt that they can pay, the taxpayer asks if their account can be placed in Currently Not Collectible Status. The taxpayer is provided a list of options to pursue in the collection process. These options include: a credit card payment, online payment, asking for an installment agreement, an Offer in Compromise, or deferment, to name a few. The account is placed on hold until the taxpayer’s financial situation is assessed and/or improves. Before the IRS agrees to an Installment Agreement or an Offer in Compromise, they will request that the taxpayer submit Collection Information Statement form 433 A to substantiate the Currently Not Collectible Status request. Basically, the IRS has 10 years to collect a tax debt from the date it was assessed.
How do I fill out Form 433 A?
Be as detailed as possible when filling Form 433 A, because the IRS returns incomplete forms. Use N/A instead of leaving boxes unfilled when necessary.
1. Fill in your personal information in Section 1. That includes: your full name; address; phone number; date of birth; marital status; social security number; a list of your dependents; describing your living arrangement; and information about your spouse.
2. Fill in your employment information in Section 2. If you or your spouse have self-employment income and filed the appropriate Schedule to claim that income with the IRS, instead of or in addition to wages, you must also complete Sections 4, 5 and 6. Include: your employer’s name and address; spouse’s employer’s name and address; how long you’ve worked for these employers; and occupation. Use N/A instead of leaving boxes unfilled when necessary. If you a wage earner, and do not have any self-employed income, complete sections 1, 2, 3, 4, 5 and 10. If you a wage earner, and have self-employed income, complete sections 1 through 7, and 10.
3. Section 3 provides the IRS with detailed financial information that provides your personal asset information, including documentation to substantiate your form. In the section for Cash and Investments, the IRS needs the most current statements for each type of account. Enter all the requested information including the total amount available for each type of account. If you own real estate, you must enter all the information about the property including current market value and loan balances. If you own or lease vehicles, include details about the car including monthly payments and when you expect to make the final payment. Also, include any other valuable items that you own, including jewelry, safety deposit box items, artwork, collections, and interest in a publicly traded company or business. Finally, determine your available individual equity in assets by adding the totals from line 1 to 7 in Box A.
4. Fill in your self-employed information in Section 4. That includes: the type of business; name and address of the business; phone number; Employer Identification Number of SS#; website; tax and payroll information; and any business interests. If you are self-employed, complete sections 1, 3, 4, 5, 6, 7 and 10.
5. If you are self-employed, you are required to fill in Section 5. List all your Business Asset Information. These include: bank accounts; property (owned/leased/rented); market values; notes receivable; and accounts receivable. Finally, determined your available business equity in assets by adding lines 8 and 11 in Box B.
6. If you are self-employed, list all your Business Income and Expense Information in Section 6. Once you fill in all of your business income and expenses, subtract line 29 from line 17 and enter the amount in Box C.
7. Enter all of your monthly household income and expenses in Section 7. This information must include: you, your spouse and your entire household. Add lines 30 through 37 to determine your total household income in Box D. Include any additional sources of income on line 31 before you total your income in Box D. Add lines 38 through 50 to determine your total household expenses in Box E. Determine your remaining monthly income by deleting Box E from Box D in Box F.
8. Calculate your minimum offer amount in Section 8. The IRS provides you with two options to calculate your offer. With the first option, if you can pay it off in 5 months, you enter the number from Box F, multiply it by 12, and then you enter the result in Box H. In the second option, if you can pay it off in 2 years, you enter the number from Box F, multiply it by 24, and then enter the result in Box G. Finally, you determine your minimum offer amount by entering the amount from Box A plus Box B and adding that total to the amount from either Box G or Box H.
9. Section 9 asks yes/no type questions that provide the IRS other information that they need to consider for a settlement of your tax debt. It includes any information on bankruptcies, asset transfers, trust funds, and lawsuits.
10. Finally, sign and date the offer form in Section 10. If you are filing jointly, be sure that your spouse also signs and dates the form.
11. Attach all the applicable attachments that are listed at the bottom of the form.
For more information on Form 433 A, check out the following video:
Where do I send Form 433 A?
Mail your 433-A and/or 433-B and related financial document(s) to the appropriate IRS processing office for your state. You may wish to send it by Certified Mail so you have a record of the date it was mailed.
If you reside in:
AK, AL, AR, AZ, CO, FL, GA, HI, ID, KY, LA, MS, MT, NC,
NM, NV, OK, OR, SC, TN, TX, UT, WA, WI, WY
Mail your application to:
Memphis IRS Center COIC Unit
P.O. Box 30803, AMC
Memphis, TN 38130-0803
If you reside in:
CA, CT, DE, IA, IL, IN, KS, MA, MD, ME, MI, MN, MO, ND,
NE, NH, NJ, NY, OH, PA, RI, SD, VT, VA, WV; DC, PR, or
a foreign address
Mail your application to:
Brookhaven IRS Center COIC Unit
P.O. Box 9007
Holtsville, NY 11742-9007