IRS Form 433-A and 433-B: The Financial Statement That Decides What You Pay

What Form 433-A and Form 433-B are and why the IRS asked for one

A Collection Information Statement is a sworn snapshot of your income, expenses, assets and debts, and the IRS asks for one whenever it is not willing to take your word for what you can pay. Form 433-A is for individuals and the self-employed, Form 433-B is for businesses, and Form 433-F is the short version the Automated Collection System (ACS) uses. An offer in compromise (OIC) uses Form 433-A (OIC) or Form 433-B (OIC). The IRS requires one for an installment agreement above the streamlined limits, for currently not collectible status, for an OIC, and for a hardship levy release. The streamlined limit for an individual is $50,000 or less paid within 72 months; above that, or with a revenue officer, the IRS wants the statement. The form asks for income, every account and asset with its equity, life insurance with cash value, business receivables, monthly living expenses and other debts.

Allowable living expenses are capped by the national standards for food, clothing, housekeeping supplies, personal care and out-of-pocket health care, by the local standards for housing and utilities by county and transportation by region, and by other necessary expenses that are documented and reasonable. Income minus allowable expenses is the monthly payment the IRS expects. Equity in assets at quick sale value, generally 80 percent of fair market value less the loans against it, is expected to be paid or borrowed against. The IRS is not asking whether you can afford your life. It is asking whether you can afford its version of your life, and the gap between the two is where the work is.

The deadline, the shelf life, and what happens if nothing goes in

The deadline is the date the revenue officer set, often on Form 9297, and the IRS generally treats a completed statement as current for about a year. When nothing comes in by the date, the next step is enforcement rather than a second request: a levy on wages or a bank account once the Final Notice of Intent to Levy (LT11 or Letter 1058) has run its 30 days, a Notice of Federal Tax Lien, and a summons under section 7602 for the records. The IRS then builds its own picture from wage transcripts and bank records, and that picture is rarely better than yours. Two rules cut the other way. Under the six-year rule, if the full balance can be paid within six years and before the collection statute runs out, the IRS may allow actual expenses above the standards. Under the one-year rule, you get up to a year to bring expenses down to the standards.

What to do in the first 30 days

The first 30 days are for gathering the source documents, running the expense side against the standards, and deciding the resolution the statement is going to support before you sign it.

1. Confirm which form the IRS wants: Form 433-A for you, Form 433-B for the business, Form 433-F if ACS is handling it, or the OIC versions if an offer is the plan.
2. Pull the last three months of bank statements and pay stubs, or a profit and loss statement if you are self-employed.
3. Look up the current IRS national standards and the local standards for your county, and compare them to your actual costs.
4. File any unfiled returns and make the current-year estimated payment, because the IRS wants you current before it approves an agreement.
5. Decide the resolution the statement supports, then read every line for omissions, because an account or asset left off is the most common reason an agreement is rejected.

Your options once the numbers are in

The statement produces one number, income minus allowable expenses, and the options run off that number and the equity in your assets. If the monthly number pays the balance in full before the collection statute expires, the result is a full-pay installment agreement, and the six-year rule may let you keep actual expenses above the standards. If it does not, the result is a partial-pay installment agreement, which the IRS reviews every two years, with expenses held to the standards. If the number is zero or close to it, the account goes into currently not collectible status, the IRS stops active collection, and a levy already in place comes off as a hardship under section 6343. If the number is small and the equity is low, an OIC on Form 433-A (OIC) or Form 433-B (OIC) is on the table, built from the same equity and monthly figure projected over 12 or 24 months.

What Brotman Law does with a Form 433-A or Form 433-B

We build the statement from the source documents, apply the standards the way the IRS applies them, and decide the resolution before a single number goes on the form. Form 2848 goes in on day one, and the revenue officer or ACS talks to us. We pull transcripts to confirm the balances and the collection statute dates. Then we build the statement: bank statements reconciled to the income lines, each asset valued at quick sale with the loans netted out, the expense side run against the current national and local standards, and every other necessary expense documented. Where actual expenses are above the standards, we make the six-year or one-year argument in writing. The package goes in with a proposal attached, an agreement amount, a hardship request or an offer, because a bare statement invites the IRS to write its own. We handle the verification questions, and once the agreement is in place we calendar the reviews so a missed one does not default it.

Do you need a lawyer for Form 433-A?

Not always, and the honest line runs at about $50,000 and whether a revenue officer, a levy or a lien is involved. A balance under roughly $50,000 with no revenue officer, no levy or lien, and no business payroll tax can usually be handled with a payment plan you set up yourself, and in that case the online payment agreement covers an individual balance of $50,000 or less paid within 72 months with no Form 433-A at all. If ACS asks for a Form 433-F on a balance in that range, fill it in honestly with the standards in front of you. The monthly engagement fits when a revenue officer is assigned; when a levy or lien is in play and the statement has to support a release; when the balance is large; or when the debt is business payroll tax.

How the monthly flat fee works

Many matters like this one run as a monthly flat-fee engagement: one number, agreed up front, that covers agency contact, deadlines, document responses and strategy until the matter resolves. On a Form 433 matter that covers the statement and the proposal attached to it, the calls and letters to the revenue officer or ACS, the responses to verification and document requests, and the agreement, hardship determination or offer at the end.

Documents to gather

The IRS verifies the statement against the documents below, so they are the starting point rather than an afterthought.

• The last three months of bank statements for every account, personal and business.
• The last three months of pay stubs, or a current profit and loss statement if you are self-employed.
• Proof of monthly expenses: rent or mortgage, utilities, insurance, medical costs, child care and court-ordered payments.
• Vehicle and mortgage statements.
• Retirement and investment statements, and any life insurance policy with cash value.
• Proof of current-year estimated payments or withholding.

What is the difference between Form 433-A and Form 433-F?

Form 433-F is the short version ACS uses by phone, and Form 433-A is the full version a revenue officer or an offer requires. It asks for the same categories in less detail, and a revenue officer will generally not accept it in place of a Form 433-A.

Does the IRS verify what I put on Form 433-A?

Yes, against your bank statements, pay stubs, wage transcripts and property records, and the statement is signed under penalty of perjury. Omissions and understatements are the most common cause of a rejected agreement, and in a bad case the reason for a criminal referral.

Can I use my actual expenses instead of the IRS standards?

Sometimes, under the six-year rule or the one-year rule. If the full balance can be paid within six years and before the collection statute expires, the IRS may allow actual expenses above the standards. Otherwise, the one-year rule gives you up to a year to bring expenses down to the standards.

Do I have to list my retirement account on Form 433-A?

Yes, every retirement account goes on the statement. The IRS treats the balance as an asset, generally reduced by the taxes and early withdrawal penalty a liquidation would cost, and a revenue officer can ask you to borrow against it before approving an agreement.

How long is a Form 433-A good for?

The IRS generally treats a financial statement as current for about a year. After that, or sooner if your income changes, the IRS asks for a new one.

What happens if I leave an account off the statement?

The agreement is rejected or later defaulted, and a deliberate omission on a sworn statement can be referred for prosecution. The IRS finds accounts through third-party reports and transcripts, so correct the statement before the officer finds the gap.

Related pages

The parent page covers the IRS collection process, the next pages cover the other letters in the sequence, and the last two explain the expense standards behind the statement.

• IRS collections attorney
• IRS Notice CP14
• IRS CP501 and CP503 reminder notices
• IRS CP504 Notice of Intent to Levy
• IRS Final Notice of Intent to Levy (LT11 and Letter 1058)
• An IRS revenue officer has been assigned
• Notice of Federal Tax Lien filed (Letter 3172)
• IRS bank levy and wage levy
• Trust fund recovery penalty (Letter 1153)
• IRS passport certification (Notice CP508C)
• What are IRS allowable living expenses
• IRS national standards