If you owe the IRS money, chances are they are going to want a collection information statement from you to determine how they can be repaid.
The IRS does not make completing the collection information statement easy on you. For starters, there are five different financial statements that the IRS collection division uses.
How do you know which one is the right one to use?
- IRS Form 433F. If you are working with the IRS Automated Collection Service, you will likely be requested to use IRS Form 433F.
- IRS Form 433A. If a local IRS collections Revenue Officer has contacted you, he will require that you completed IRS Form 433A. The 433A is used if you personally owe taxes to the IRS (you are the taxpayer).
- IRS Form 433B. Conversely, an IRS Revenue Officer will request that you complete a Form 433B if you have a business that owes taxes to the IRS (i.e., you are not the taxpayer, but your business is).
- IRS Form 433A (OIC) and Form 433B (OIC). If you want to settle your tax debt with an offer in compromise, the IRS has two different financial statements, Form 433A (OIC) or 433B (OIC), that they use.
Let’s go through the differences in the financial statements used in an IRS collection investigation, either by Automated Collection Service or a Revenue Officer – Forms 433F, 433A and 433B.
To begin with, the 433F is a more streamlined, simplified form, requiring fewer and simpler disclosures.
To illustrate, the 433F is two pages.
By comparison, the 433A and 433B are six pages.
The IRS is asking much fewer questions on the 433F.
Do you want the IRS to ask you more questions, or less?
Here are a few questions that are on the 433A and 433B that are not on the 433F:
- Are you a party to a lawsuit?
- Have you have ever filed bankruptcy (and details as to the filing)?
- In the past 10 years, have you lived outside of the U.S. for more than six months? (If you have, the time away extends the IRS collection statute of limitations.)
- Are you the beneficiary of a trust, estate, or life insurance policy?
- Are you a trustee, fiduciary or contributor of a trust?
- Do you have a safe deposit box, and if so, where is it and what are the contents?
- In the past 10 years, have you transferred any assets out of your name for less than their full value?
- Any increase or decrease in income anticipated (asked on 433B only)?
The Form 433A also asks for your date of birth, driver’s license number, and your employer’s phone number.
The 433B also wants disclosure of the names of all business officers, partners, and major shareholders.
The 433F does not ask for any of these disclosures.
So when can you use the 433F when negotiating with the IRS collection division?
- You can use the 433F if you are negotiating with the IRS Automated Collection Service. The IRS Automated Collection Service is a series of call centers operated by the IRS Collection Division. They are staffed by IRS collection representatives. The majority of the work handled by ACS is sending out computer-generated collection letters, and fielding taxpayer telephone calls in response to those letters. You will never meet face to face with an IRS ACS representative, nor will you ever speak to the same person twice. ACS is impersonal, and that can make negotiations challenging at times. But ACS also uses the 433F in their negotiations to resolve an account (i.e., installment agreement, uncollectible).
- IRS Revenue Officers have some flexibility in accepting the 433F if they choose to do so. Internal Revenue Manual 18.104.22.168 (3) states that Revenue Officers may use the Form 433F if you owe less than $250,000 in income taxes, or less than $100,000 from the trust fund recovery penalty (and are a wage earner). But it is unlikely a Revenue Officer will accept the shorter 433F over the 433A or 433B. To begin with, Revenue Officers are the highest level of IRS collection enforcement – they are going to want the highest level of financial disclosures. In that regard, the standard demand a Revenue Officer makes is for a 433A or 433B, not a 433F. A Revenue Officer likely knows that a case closure write-up that is based on a 433F will likely be rejected by his Group Manager, with the case file sent sent back to the RO to get the 433A/433B disclosures. but the Internal Revenue Manual does permit a RO to use the 433F, it is just a matter of practical application of whether that will really occur.
One last note:
There are times when you do not have to provide a financial statement at all. The IRS has a program called Streamlined Direct Debit Installment Agreements. In a nutshell, if you owe the IRS $50,000 or less, and can repay the amount owed within 72 months, the IRS will grant you this payment plan without requiring financial disclosures.
All that the IRS requires to avoid financial disclosures is that the payments are made by a direct debit out of your bank account every month, for up to 72 months, resulting in full payment. As an added benefit, if the IRS has not yet filed tax liens against you, their policy is to withhold filing a lien if you enter into a streamlined installment agreement.
An IRS collection information financial statement is at the core of most every negotiation with IRS collections. Knowing which one is required, if at all, is an important part of laying your cards on the table.