How to Fill Out Form 433-B (Collection Information Statement for Businesses)
If your business has applied for an installment agreement or an offer in compromise, the Internal Revenue Service may ask you to fill out Form 433-B. This is a collection information statement for businesses. The IRS uses Form 433-B to assess how much a business can afford to pay on its taxes owed.
To help you out, this post explains how to fill out this form, and it outlines some options for resolving your business tax bill with the IRS. To get help with your back taxes now, contact us at the W Tax Group today. We provide our clients with the specialized attention they need to find the best resolutions possible for their tax problems.
Why the IRS Requests Form 433-B
Form 433-B tells the IRS about your business’s assets and average gross monthly income. The IRS uses this information to decide if you qualify for an installment agreement (payment plan) or offer in compromise (tax settlement). You may also need to fill out this form if your business needs to temporarily delay paying taxes.
Only use this form if your business is a c-corp, s-corp, partnership, or limited liability company with more than one member. If your business is a sole proprietorship that files taxes on a Schedule C, you should typically file Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals). In some cases, however, the IRS asks individuals to fill out Form 433-F instead.
Requirements for Form 433-B
Generally, the IRS will not approve a payment plan or an offer in compromise for your business unless you meet these requirements:
- Not in a bankruptcy proceeding.
- Made federal tax deposits for the last two quarters.
In some cases, you may need to meet additional requirements. For instance, the IRS generally won’t allow businesses to make payments on more than $25,000 in back taxes unless the business is no longer operating.
How to Fill Out IRS Form 433-B
This form requests detailed information about your business assets, debts, monthly income, and expenses. Keep reading for line-by-line tips on how to fill out this form with your business information.
Make Sure You Have the Right Version of the Form
There are two different versions of this form. Before you get started, make sure that you have the right one. If you’re applying to settle your business taxes, you should use Form 433B (OIC). Use Form 433-B if you’re applying for a payment plan.
These forms request very similar information. We note specific differences in the instructions below.
Basic Business Information
Both 433-B and 433-B (OIC) request basic information about your business. This part is self-explanatory. It includes details such as your Social Security Number, Employer Identification Number, type of business entity, and contact details.
On the 433-B (OIC), you note details about partners, officers, LLC members, and major shareholders in section one. On the standard 433-B form, the second section requests this information along with ownership percentages and annual salaries.
On both forms, you must note the frequency of tax deposits and your average gross monthly payroll. If you’re not sure, check with your payroll service provider. Form 433-B also requires details about the payment processors you use such as Paypal or Google Checkout, and it asks which credit cards you accept and your merchant account number.
Other Financial Information
Section three of Form 433-B and section six of Form 433-B (OIC) ask the following questions about your business:
- Do you use a payroll services provider?
- Are you party to a lawsuit? If so, what is the amount of the suit?
- Has the business filed for bankruptcy in the last 10 years?
- Do any related parties owe money to the business?
- Has the business transferred any assets for less than full value in the last 10 years?
- Does the business have subsidiaries, parent companies, or other business affiliations?
If you’re filling out the 433-B (OIC), the form asks the following additional questions:
- Has the business been involved in litigation with the IRS or the United States?
- Has the business transferred any real property in the last three years?
- Has the business operated outside of the United States for more than six months in the last 10 years?
- Does the business have any assets or real property outside of the United States?
- Are there any funds held in a trust by a third party?
- Are there business lines of credit? Are they secured by property?
- Have you experienced an increase or decrease in anticipated income?
- Are you a federal contractor?
Business Asset Information
Both versions of Form 433-B require detailed information about your business assets. This is section four of the 433-B and section two of the 433-B (OIC). Both forms request very similar information, but the OIC form requires you to do an additional calculation where you multiply fair market value of the asset by 0.8 and then subtract the loan balance. This helps the IRS determine how much equity you have to put toward your settlement offer.
Make sure you have the following details about your business assets so that you can fill out the form correctly:
- Cash on hand.
- Cash and other contents in on-premise safes.
- Business bank accounts and balances.
- Details about accounts receivables.
- Investment accounts including stocks, bonds, mutual funds, virtual currency, etc.
- Real property and vehicles — purchase date, fair market value, loan balance, monthly payments, date of final payment, and equity.
- Business equipment.
- Intangible assets.
The 433-B form also asks about your business liabilities and your total available credit.
Business Income and Expenses
Form 433-B asks for details about business expenses and income in section five. On the 433-B (OIC), section three is for business income information, while section four is for business expense information.
On the 433-B, you can detail your business income and expenses from the last three, six, nine, or 12-month period. On Form 433-B (OIC), you can use the last six or 12-month period. Alternatively, with the OIC form, you can attach a current profit and loss statement covering the last six or 12 months, and then, note your total income and expenses on the form.
Both forms require the following details about your business income:
- Gross receipts
- Gross rental income
- Interest income
- Cash receipts
- Other income
Here is what you need to note about your business expenses:
- Materials or supplies
- Inventory purchased
- Gross wages and salaries for business personnel
- Monthly payments for utilities/telephone
- Vehicle expenses including gasoline, repairs, and maintenance
- Current taxes such as quarterly payments and payroll taxes
- Other expenses
At this point, you are done with IRS Form 433-B. All you need to do is sign, seal, deliver, and then, wait for a response. But if you’re filling out Form 433-B (OIC), you have one more section to complete.
Calculating Your Minimum Offer
To complete Form 433-B (OIC), you need to calculate your minimum offer. There are two calculation methods to determine your minimum offer amount. Both start with the equity in your business assets. Then, you add on your business’s future earning potential, but the amount you include depends on how long you need to pay the settlement.
If you can pay the settlement in five months, you multiply your remaining income by 12. If you need up to 24 months to pay the settlement, you should multiply your remaining income by 24. Your remaining income is the difference between your business income and expenses.
Note that the IRS does not accept every offer. If the IRS believes that you can pay your tax debt in full by selling assets, cashing out investment accounts, or taking out a loan, the agency may reject your offer and demand full payment.
This is when a tax attorney can be critical. They understand how to convince the IRS to decrease the minimum offer, and they also know how to explain to the IRS that you can’t necessarily liquidate your business equipment, especially income-producing assets. In fact, if you structure the offer correctly, the IRS shouldn’t take into account the equity in income-producing assets. That can save you a lot of money.
Supporting Documents for IRS Form 433-B
Once you submit Form 433-B explaining your business’s financial situation, the IRS will reach out if it needs more detail or supporting documents. When you complete form 433-B (OIC), you should include the following documents:
- P&L statement showing the last six to 12 months.
- Copies of the last six months of recent bank statements.
- Copies of loan statements, loan payoffs, and balances.
- Details on which loans are secured by a business asset.
- Documents to support any special circumstances noted on the form.
- A completed copy of Form 656.
Get Help With Business Back Taxes
Filling out Form 433-B and dealing with business back taxes can be complicated and frustrating. But you don’t have to deal with this on your own. The tax attorneys at the W Tax Group can help you file this form or explore other resolution options for your taxes owed.
Ready to get help and put this stress behind you? Then, contact us today. We’ll start with a no-obligation conversation, and then, we’ll help you find the best path forward for your situation.