IRS Form 433: When & How to Prepare One
Depending on the tax relief option you’re applying for, the IRS may ask you to complete a Form 433 Collection Information Statement (CIS). There are several versions of this form, but they all serve the same purpose – to explain your financial situation to the IRS.
In this guide, we’ll look at the various 433 forms, explain when to use them, and briefly outline how to complete them. Consider seeking professional assistance to ensure you complete the form correctly and provide the right supporting documents. Errors can lead to processing delays or cause the IRS to reject your relief applications.
To get help now, contact the Law Offices of Stephen B. Kass at 212-843-0050 to find out how we can help you request currently not collectible status, and if that’s not the right option for your case, we’ll help you explore other strategies.
Key Takeaways:
- The IRS uses Form 433 to evaluate your income, assets, expenses, debts, and overall ability to pay your tax debt.
- There are several versions of Form 433, including forms specifically for individuals and businesses.
- Your financial disclosure may affect your monthly payment and your eligibility for relief.
- The IRS also uses this form to assess your ability to access equity in your assets to pay off your tax debt.
- If you owe $50,000 or less, you may qualify for a Simple Payment Plan without having to submit an information statement.
The Three Versions and When Each Applies
When people ask “what is a 433?” they’re often surprised to find out that there are actually three main versions of this form. The forms that may apply to your case include:
- Form 433-A and 433-A (OIC): Form 433-A is the financial disclosure form that individuals must fill out when they are requesting relief or applying for an installment agreement with a substantial amount of debt. On the other hand, Form 433-A (OIC) is the specific form required for individual taxpayers requesting an offer in compromise.
- Form 433-B and 433-B (OIC): Form 433-B is used to obtain current financial information necessary to determine how a business can satisfy the tax it owes. On the other hand, Form 433-B (OIC) is used for businesses requesting an offer in compromise.
- Form 433-F: Form 433-F is a shorter collection information statement. You may need to fill out this form if the IRS is taking collection action against you and wants to figure out potential payment options.
Why Strategy Is Critical: 433 Hardship Case Study
The right strategy can help you save a lot of money and avoid aggressive IRS collection actions. That’s why it’s critical to work with a professional who understands the collection processes and the resolution options clearly. To understand why, check out this case study:
“I had a client who owed about $54,000. He had $57,000 equity in his house so he wouldn’t qualify for an offer in compormise. Howwver, he had just retired so his monthly income had been cut in half. So, we filed the 433 and got him on CNC status. The tax debt was just four years from expiring so he’ll ride out the four years and not have to pay anything.” – Stephen Kass
That simple story highlights the importance of tax resolution experience. A CPA or tax professional who focuses on tax prep and planning doesn’t necessarily know which path to take on a resolution case, but an attorney who specializes in this area can help you get on the road to relief.
What the IRS is Actually Looking For
The IRS reviews this form and your supporting documentation in depth to determine whether you have assets or equity that could be used to pay your debt.
It’s how they determine how much you can afford to pay monthly on an installment agreement or how much they can collect from you before the debt collection period expires in the case of an offer in compromise. The agency also uses this form to assess eligibility for currently not collectible status and Partial Payment Installment Agreements.
Here are the different categories the IRS evaluates with Form 433:
Income from all sources
Taxpayers must disclose all sources of household income for the collection analysis. This may include wages, salaries, self-employment income, Social Security benefits, pension payments, retirement distributions, rental income, and other sources of income. Self-employed taxpayers often have to provide information on their business income and expenses.
The IRS will likely verify the information you provide by using bank statements, pay stubs, and other records such as sales reports for your business.
Living expenses
The IRS recognizes that not all of your income is available to pay tax debt, and to determine how much you have available, they look at your monthly expenses in comparison to your income. However, the agency doesn’t necessarily accept all expenses as stated.
The IRS sets collection standards for essential expenses. They use national standards for food, clothing, household items, out-of-pocket healthcare expenses, and vehicle ownership costs. Then, they apply local standards for housing (rent, mortgage, and utilities) and vehicle operating expenses. The amount varies based on the number of people in your household. In most categories, you can claim the lower of the financial standard or your actual expenses, but the IRS lets you claim the full out-of-pocket healthcare allowance, whether you spend it or not.
Occasionally, the IRS will let you claim an amount over the allowance but only if you establish that there are extenuating circumstances. A tax attorney can be critical for that.
Assets and available equity
This is a significant part of your payment calculation. If you have valuable assets or equity in your assets, the IRS may expect you to use those assets to pay off or pay down your tax debt. Examples include bank accounts, investment accounts, retirement accounts, home equity, vehicles, cryptocurrency, business equipment, and ownership interests in companies.
If your equity in assets is accessible, it can dramatically affect your ability to request a hardship-based resolution. For example, if you are asking for an offer in compromise for $200,000 in tax debt but you have $600,000 in equity in your vacation home, the IRS is likely to expect you to use that equity to pay off your tax debt.
How the 433 Determines Whether You Qualify for CNC Status
Currently not collectible (CNC) status may be available to taxpayers who would face significant financial hardship if they paid any amount towards their tax debt. This doesn’t mean that anyone who would struggle financially if they paid what they owe qualifies; the standard for this refers to specific IRS hardship status requirements.
The IRS evaluates CNC eligibility by comparing a taxpayer’s monthly income with the agency’s allowable monthly expenses based Form 433-A, B, or F. If their formula finds that the taxpayer has no ability to pay after accounting for necessary expenses, the IRS will place the account in temporary hardship status. Once your account is marked as “CNC” or “status 53,” the IRS stops all collection actions against you but may still file a tax lien.
This is often a temporary solution. The IRS may require proof of your financial status in the future, and if your finances improve, they’ll expect you to start making payments on a standard or partial payment installment agreement. However, many taxpayers get full relief under this program – if your tax debt expires while your account is on CNC status, the IRS can no longer legally collect.
Filing a 433 When Applying for Payment Plans
Some taxpayers may need to file Form 433 when applying for a payment plan. If you owe under $50,000 and qualify for a Simple Payment Plan, the agency doesn’t require a Collection Information Statement unless there are extenuating circumstances such as owing over $25,000 in trust fund taxes or a history of defaulting on payment plans.
The IRS may require a 433 form for payment plans in the following situations:
- You owe over $250,000 and are applying for a non-streamlined installment agreement.
- You owe under $250,000, but a revenue officer requires a collection information statement.
- You’re applying for payments on business taxes, including over $25,000 in trust fund taxes.
- You can’t pay off the tax debt by the Collection Expiration Date and want to set up a Partial Payment Installment Agreement.
In the past, the IRS required Form 433-F if you owed between $25,000 and $50,000 but didn’t pay via automatic direct debit or payroll deductions. However, that obligation was eliminated when the IRS rolled out the Simple Payment Plan in 2026.
Payment plans can be more complex than anticipated. Learn more about IRS installment agreements and what may affect your chances of approval.
Strategy: Getting Below the $50,000 Threshold
If you owe $50,000 or less, you can typically qualify for a Simple Payment Plan without submitting Form 433. Whenever possible, you may want to consider making a payment to get the balance below this threshold before applying for a payment plan.
Here’s why: If the IRS requires a financial disclosure and sees that you have significant assets, they may deny your request for payments and demand payment in full.
Imagine, for example, a taxpayer owes $62,000 and has $250,000 in an investment account. If they file a 433 form, the IRS will see these funds and may require full payment. In contrast, if they pay $12,000 before applying for payments, they should get accepted into the Simple Plan without financial details.
Please note that this doesn’t mean that paying your tax debt down to the $50,000 threshold is always the right choice. The right path forward depends on the funds you have available, upcoming expenses, the collection deadline, and other relevant factors. Consult with an attorney for all the options.
How Errors or Omissions on the 433 Form Can Hurt You
Errors and omissions can cause issues with Form 433. A simple mistake can cause the IRS to reject your application for relief, while a misstatement could be considered tax fraud – if the IRS believes you’re understating your income or assets to evade paying taxes, they could recommend a criminal investigation. While that’s generally not a risk for most taxpayers, it’s important to be as cautious as possible with all IRS paperwork.
An incorrect valuation of assets can also negatively affect your application or payment. The IRS generally adjusts valuations to the asset’s quick sale value, typically 20% less than the fair market value. However, if you accidentally inflate the value of some assets on your form, you may face higher payments or get rejected for relief. On the flip side, undervaluing your assets can cause the IRS to reject your application or dispute your valuations.
Frequently Asked Questions (FAQs)
Here are common questions we get on Form 433.
What happens if I make a mistake on my Form 433?
If you make a mistake on Form 433 and submit it, the consequences largely depend on the severity of the error. A minor miscalculation may be corrected with a simple explanation to the IRS, but a significant error could lead to greater scrutiny from the IRS or a rejection of your request for relief.
Can the IRS reject my Form 433 and request additional documentation?
Yes. If you do not submit the documentation that is needed for a thorough review of your finances, the IRS may request more information or reject your request for relief.
How often does the IRS review my finances after I submit Form 433?
It depends on the type of relief you apply for. With an installment agreement, the IRS may not every request updated information as long as you remain compliant with the terms of your plan. If you are on CNC status or have a partial payment installment agreement, the IRS may periodically request financial information to ensure you still qualify.
Does filing Form 433 affect my credit score?
No. Submitting Form 433 is not an action that is reported to the credit bureaus. Tax debt does not appear on your credit report. However, lenders will take tax debt into account when assessing your eligibility for loans.
What happens if my financial situation improves?
This depends largely on the type of relief you have. With currently-not-collectible status and partial payment installment agreements, a positive change in your finances can lead the IRS to cancel your arrangement and require you to set up a traditional Installment Agreement.
Does my spouse’s income have to be included on Form 433?
The 433 forms for individuals ask for your spouse’s income and other information, but it can vary depending on your filing status, current living arrangements, and type of tax debt.
Get Help Filling Form 433
If you’re not sure which relief options fit your financial situation, the Law Offices of Stephen B. Kass is here to help with the financial analysis behind Form 433. Call us at 212-843-0050, set up a consultation online, or learn more about how we can help you apply for currently not collectible status.
Resources:
https://www.irs.gov/pub/irs-pdf/f433a.pdf
https://www.irs.gov/pub/irs-pdf/f433aoi.pdf
https://www.irs.gov/pub/irs-pdf/f433f.pdf
https://www.irs.gov/pub/irs-pdf/f433boi.pdf
https://www.irs.gov/payments/simple-payment-plans-for-individuals-and-businesses
https://www.taxpayeradvocate.irs.gov/notices/currently-not-collectible/
https://www.irs.gov/irm/part5/irm_05-016-001r
