Offer Compromise Settlement and Form 433-A (OIC)
Learn how Form 433-A (OIC) supports an offer in compromise and what financial information the IRS reviews.
Offer Compromise Settlement and Form 433-A (OIC)
Discuss Your Tax Issue With an Experienced Attorney and CPA
Form 433 A
When taxpayers have unfiled tax returns, they usually have back taxes owed as well and a Offer Compromise Settlement may help them by filing an IRS form 433-A. Taxpayers are encouraged to file unfiled returns as soon as possible, and to pay back any tax debts. Realistically, it is not always possible for taxpayers to pay the back taxes owed in full to reach a tax resolution. However, the Internal Revenue Service will still want to collect the tax debt owed. The IRS can place levies on wages, liens on personal or business property, as well as seize valuable assets.
One option to paying back a tax debt is through an appeal to the IRS for an Offer Compromise Settlement (OIC). An Offer Compromise Settlement is an agreement between the IRS and the taxpayer. If approved, an Offer in Compromise Settlement allows a taxpayer to clear their tax liability to paying less than the full amount of back taxes owed. OICs are not as common as other payment plans, and if a tax liability can be paid in full through other means such as an installment agreement, the taxpayer will not be approved. To be eligible for an OIC, the taxpayer must have filed all tax returns and made all tax payments for the current year.
In order to file for an Offer in Compromise Settlement to help alleviate back taxes owed, Form 433-A (OIC), the Collection Information Statement for Wage Earners and Self-Employed Individuals must be filled out. This form helps the IRS review the taxpayers budget and determine how much they can afford to pay monthly.
Form 433-A (OIC) is filled out to prove to the IRS that paying back taxes owed in full is a financial burden to the taxpayer and their family. It is important that when this form is filled out by you or by an experienced New York tax lawyer that you provide the most recent and detailed information available. Form 433-A (OIC) will require information about monthly income and expenses to create a monthly budget. This budget will show the funds available for the taxpayer to pay for the OIC.
Form 433-A(OIC) Offer Compromise Settlement will require information on:
- Employment Information for Wage earners, including taxes taken on paychecks
- Personal and/or business bank accounts, with statements for the previous three months
- Information on any lawsuits, bankruptcy filings, trusts, estates, safe deposits that you might be associated with
- Investments including stocks, bonds, mutual funds, and retirement assets
- Any available credit on credit cards
- Life insurance policies with cash value
- Real property owned
- Personal Vehicles leased and purchased
- Personal Assets
Monthly Income and Expenses will also need to be reported. This can include:
- Wages
- Interest-Dividends
- Business Income
- Pension/Social Security
- Child Support
- Alimony
- Distributions (ex. K-1, IRA)
- Rental Income
- Food, clothing, misc. expenses
- Housing and utilities expenses
- Vehicle ownership and operating costs
- Health insurance
- Life insurance
- Secured debts
- Delinquent taxes owed
- Out of pocket health care costs
When they receive your 433-A (OIC), the IRS will review the information provided on it to calculate the amount of offer in compromise they are willing to accept based on your situation. This is the highest amount you can pay without creating financial hardship for you and your family.
Note that if you are applying for a different program, such as a partial payment installment agreement, you may need to complete Form 433-F, which is similar to 433-A but less detailed.
Carefully Preparing Form 433-A (OIC) with accurate and complete information is important to ensure that you are paying the correct offer amount to the IRS. By not filing out the form accurately and completely, taxpayers can have their offer denied. If you face a large tax debt to the IRS and are unable to pay the back taxes, contact an experienced lawyer who is a tax professional who understands tax laws can help you calculate your Offer Compromise Settlement amount.
Sources:
https://www.irs.gov/taxtopics/tc204.html
https://www.irs.gov/pub/irs-pdf/f656b.pdf
Frequently Asked Questions About Offer Compromise Settlement and Form 433-A (OIC)
Answers to common questions about Offer Compromise Settlement and Form 433-A (OIC), relevant tax procedures, and when professional guidance may help.
When taxpayers have unfiled tax returns, they usually have back taxes owed as well and a Offer Compromise Settlement may help them by filing an IRS form 433-A. Taxpayers are encouraged to file unfiled returns as soon as possible, and to pay back any tax debts. The rules and available options depend on the taxpayer’s particular facts.
The issue may affect filing obligations, tax balances, deadlines, penalties, collection activity, or appeal rights depending on the circumstances.
Keep the relevant tax returns, notices, account transcripts, correspondence, payment records, and supporting financial documents. The exact records needed depend on the issue.
Seek advice promptly after receiving a notice, learning of a filing problem, or facing an audit, appeal, or collection deadline. Early review provides more time to evaluate the response.
Timothy S. Hart is both a tax attorney and a CPA. He can review the facts, explain the applicable process, identify practical options, and communicate with tax authorities when representation is appropriate.
The IRS and State Tax Departments are not your friend, and are looking after their best interest
Stop fighting alone. Call now for your free consultation with Tim Hart.
