No matter what collection alternative you wish to pursue, you will be required to provide detailed financial information as a precondition to IRS consideration.
The IRS uses several forms for this purpose each of which is discussed below.
Form 433A – IRS Collection Information Statement for Wage Earners and Self-Employed Individuals
The IRS will require that you complete and submit this form if you are a W-2 employee or are self-employed.
In the past, self-employed taxpayers were required to complete both forms 433-A and 433-B. Now all of the required financial information has been combined into one form.
Generally, you are required to provide along with the financial statement your last 3 bank statements (with canceled checks) and documentary evidence of your living expenses.
The Purpose of Form 433A
The IRS uses Form 433Ato determine whether and to what extent a delinquent taxpayer will be able to pay his or her IRS debt.
The taxpayer is required to sign the 433-A under penalties of perjury.
Form 433B- IRS Collection Information Statement for Businesses
This is the business equivalent of Form 433-A and is used for corporations, partnerships, LLCs and other entities to report their financial information.
The IRS will compare this form to your business tax returns. If the numbers vary greatly, it will ask you to provide documentary evidence of your business expenses.
The Purpose of Form 433B
The IRS uses Form 433B to determine whether and to what extent a delinquent business taxpayer will be able to pay its existing tax debt while remaining current with its future tax obligations.
This form also is signed by an authorized representative of the taxpaying entity under penalties of perjury.
Form 433F – Short Form Collection Information Statement
This is a short form version of Form 433-A and is also signed under penalties of perjury.
A Word to the Wise
The terms of your offer in compromise or installment agreement will greatly depend on the data included in the financial statements provided to the IRS collection agent.
We have seen many cases where a taxpayer representing himself signed a financial statement that was prepared by an IRS collection agent.
Typically, the taxpayer is frightened and intimidated and signs the statement without carefully looking at it or having his accountant review it.
Never sign a financial statement (or any statement, waiver or other document) without first having a tax professional review it.
The Taxpayer Bill of Rights specifically states that IRS agents must immediately adjourn any meeting where a taxpayer says he wishes to consult with his attorney or legal representative.
If the IRS agent balks, tries to demean you or your decision to seek counsel, you should immediately ask to speak to his supervisor.
He is violating your rights!