Form 433 is the base form the IRS Revenue Officers use to determine how large or small a monthly payment a taxpayer can pay. There are different versions of it for different situations. There is a business form, a self-employment version, a wage-earner version, and, of course, Spanish versions, as no one is immune from paying income taxes in the United States. While the IRS may have seemed in a hurry to take a taxpayer’s assets, with its tax levies and tax liens, the IRS really does not want them. They want the returns filed and the taxes, if any, paid.
The form is easy to complete if a taxpayer knows where to start and is willing to lay everything on the line. Dishonesty in completing the form is not only breaking the law, but can hurt the taxpayer more than assist it. The difficulty most taxpayers have with this form is they just do not organize their finances, or the paperwork documenting them, in the same way
Compiling Asset Information
The best way to start completing a Form 433 is on the page with the household or business income and outgo. There is a list at the bottom of the page that explains what documentation is needed for the form. Reading the list and gathering the documentation is the place to start. (For some taxpayers, this is difficult because they do not know the formal names for some forms, such as a UCC Financing Statement or they are not sure who to ask for their retirement account summary—consult a tax professional.)
With this information gathered, the taxpayer should be able to provide the following information about its assets:
- Property owned (and provide location where the property is kept)
- Original Purchase Price of the Property
- Current Loan Balance
- Lender, Its Address and Phone Number
- Date of Original Loan
- Estimated Payoff Date
- Amount of Monthly Payment
If any of these items do not apply (as in the case when the loan is already paid off, the taxpayer just needs to write “N/A” in the blank when completing the form.
The form requests copies of the last three months of bank statements, the amount of cash on hand, and income from wages and other sources (with paystubs and/or profit and loss statements).
What the IRS Does With the Asset Information
It has been said by a frequently non-responding taxpayer, “I told that old coot who my customers were and he just wanted to know so he could the levy my payments from them.” That is not exactly what happened. The taxpayer was asked to complete and submit the Form 433. The next step should have been to firm up some payment arrangements. However, the taxpayer was “non-responding.”
Setting that taxpayer’s story aside, what the IRS does with this asset information is assess whether the taxpayer has sufficient assets to pay the taxes. Assets include possession and incoming income. Many taxpayers do not have a lot of assets. Some, however, do. Generally, the IRS looks at the Fair Market Value of the Asset and multiplies it by 80% (what it calls a “quick sale value,” meaning if they take the property, what they mightget for it).
If there is a loan against the property, the payoff amount is subtracted. Then they have to decide, even if there is some value after these calculations, whether they should proceed. They only go this far when a delinquent taxpayer is non-responsive.
So the taxpayer who has just completed the income side of the Form 433 should not be fearful. If there is a large equity in the home, a payment solution might be to refinance the home and pay the IRS what it is due. This can get complicated. Should a taxpayer find itself in such a situation, it should seek the assistance of a tax professional, CPA specializing in IRS collection issues, or a tax attorney. The fees spent are worth the intelligent, knowledgeable input and peace of mind that springs from such a consultation. The taxpayer is also at the junction of considering settlement options with the IRS.
Determining allowable expenses for the Form 433 is the subject of another article. Stay tuned!
Jeannine Silkey - With over 40 years work experience, Jeannine Silkey has a wealth of practical information for the small business owner. Keeping it simple, ...
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