You never know what curveballs life may throw your way, and unfortunately, those curveballs may cause you to strike out. Whether you recently became unemployed or a huge tax bill showed up on your doorstep, paying back the IRS may seem impossible. Luckily, if you’re in financial hardship, Uncle Sam may give you a break.
Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, allows you to prove your financial hardship. Below, we’re going to cover all you need to know about IRS Form 433-A.
What is Form 433-A?
The purpose of IRS Form 433-A is to provide the IRS with information about your income, expenses, assets, and liabilities. IRS Form 433-A is a form filled out by a taxpayer who has been asked by the IRS to provide financial information so that the IRS can begin to calculate how that taxpayer can pay off an outstanding tax debt.
IRS Form 433-A should be used by taxpayers who are wage earners, or who are self-employed individuals who file a Schedule C. If you own a business and do not file a Schedule C (for example, if you own a corporation or in a business partnership), then you will need to complete IRS Form 433-B as well. Community Tax’s skilled representatives can provide IRS tax help with questions or with the filing of either form if they seem a bit confusing.
Understanding Form 433-A
You may be asked to complete an IRS Form 433-A by an IRS Revenue Officer or another official who wants to establish your ability to pay your balances with the IRS. Completing IRS Form 433-A may allow you to establish that you are suffering from a complete or partial financial hardship. This form also allows you to provide the IRS with information they may not otherwise have about you.
Certain sections of IRS Form 433-A are filled out only by taxpayers who are self-employed. Usually, IRS Form 433-A is filled out when applying to the IRS for a tax debt repayment plan, such as:
- Installment Agreement (IA): If you’re struggling with a financial hardship, such as an unexpected medical bill, you can repay your tax debt over time through an installment agreement with the IRS.
- Offer in Compromise (OIC): If you meet specific requirements, you can send the IRS an offer in compromise to help settle your tax debt. The decision will be made based on your income, expenses, equity in assets, and how much debt the IRS predicts you’ll be able to pay back within reason. To submit an offer in compromise, you must file Form 433-A OIC.
- Currently not Collectible (CNC) status: If you’re in a tough financial situation and are receiving numerous letters in the mail from the IRS, such as intent to levy notices, collections letters, and enforcement letters, you can halt them by applying for currently not collectible status. If the IRS deems you cannot pay your taxes due to your current financial situation, they will stop all of those harassing pieces of mail from entering your mailbox until your situation improves — however, you will still be liable to pay your tax debt once you are financially capable of doing so.
You should also be aware that if the IRS cannot verify the information provided on IRS Form 433-A (for example, by comparing your information to the W-2s sent to the IRS by your employer), then you may be asked to provide verification of the income, expense, and asset information. You can also expect the IRS to ask you for verification if your living expenses are particularly large when compared between the general cost of living in your county and the information given on IRS Form 433-A.
Filling Out Form 433-A
Understanding IRS forms can be a headache for anyone. To help you understand and fill out IRS Form 433-A, we’ll go over each section and what information you’ll need. Find Form 433-A instructions below:
The first section requires basic personal information. To complete this section, you will need your:
- Full name and spouses (if applicable)
- Home, cell, and business phone numbers
- Home address
- Marital status
- Name, age, and relationship of dependents
- Social Security number, or ITIN, of you and your spouse
- Date of birth for you and your spouse
- Driver’s license number and state
This section requires your employment information for you and your spouse (if applicable), including your:
- Employer’s name
- Employer’s address
- Work telephone number
- Time of employment
- Number of withholding allowances claimed on Form W-4
- Pay period (weekly, bi-weekly, monthly, other)
The third section of IRS Form 433-A requires any additional financial information you may have. This includes information on whether:
- You’re a party to a lawsuit
- You’ve filed for bankruptcy
- You’ve lived outside of the U.S. within the past ten years for six months or longer
- You’re the beneficiary of a trust, estate, or life insurance policy
- You’re a trustee, fiduciary, or contributor of a trust
- You have a safe deposit box
- You’ve transferred any assets for less than their full value in the past ten years
Section four is where you’ll list all of your personal asset information. This includes:
- Cash on hand
- Personal bank accounts
- Available credit
- Real estate
- Personal assets, such as furniture, jewelry, antiques, etc
In the fifth section on Form 433-A, you will provide information on your monthly income and expenses. Some examples of sources of income include:
- Social Security
- Child support
Example of living expenses include:
- Food and clothing
- Housing and utilities
- Vehicle ownership costs
- Vehicle operating costs
- Health insurance
- Child and dependent care
Sections 6 and 7 on Form 433-A are required to be filled out by self-employed individuals only. In section 6, you will provide business information, including:
- Business name and address
- Employer Identification Number (EIN)
- Type of business
- Business website
- Total number of employees
- Average gross monthly payroll
- Frequency of tac deposits
- Third-party payment processors used to accept credit card payments
- Business bank accounts
- Business assets
The last section on Form 433-A is also required to be completed by self-employed individuals. In this section, you will provide sole proprietorship information on business income and expenses. Examples of business income include:
- Gross receipts
- Gross rental income
- Cash receipts
Examples of business expenses include:
- Materials purchased
- Inventory purchased
- Gross wages and salaries
- Utilities and telephone
- Gasoline and oil for business vehicles
- Repairs and maintenance
- Current taxes
- Other expenses, such as student loans and unsecured debts
Filing IRS Form 433-A
If this seems like a lot to handle, don’t worry. A Community Tax professional can help you fill out IRS Form 433-A to make sure that you have provided all the necessary information and substantiating documentation. This is most helpful if you don’t have clear proof of some of your expenses (for example, if you pay rent, food, or utilities by cash).
A tax professional will be able to walk you through the income and expense verification process the IRS will use, and help you decide how you want to prove your income, expenses, and assets on IRS Form 433-A.
Visit the IRS website for form locations or to download a copy of IRS Form 433-A. Call Community Tax today for IRS tax help with forms and getting out to tax debt.