How to Complete Form 433-A (OIC) for an IRS Offer
Understand how to present your financial data on Form 433-A (OIC). This detailed statement provides the basis for an IRS Offer in Compromise review.
An Offer in Compromise (OIC) allows certain taxpayers to resolve their tax liability with the IRS for less than the full amount they owe. A central part of this process is Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals. This form provides the IRS with a detailed financial picture to assess a taxpayer’s ability to pay. The IRS evaluates your income, expenses, and asset equity to calculate your reasonable collection potential, and the information on this form directly influences the final decision on your OIC proposal.
Information and Documentation Required for Form 433-A (OIC)
Before beginning Form 433-A (OIC), you must gather many financial documents to substantiate the figures you will report. For personal and household details, you will need identification for yourself, your spouse, and any dependents, including names, Social Security numbers, and addresses. The IRS also requires employment history information, including employer details, pay schedules, and the number of allowances claimed on your Form W-4.
A large part of the required documentation relates to your assets. You must collect recent statements and records for the following:
- Bank accounts, including checking, savings, and money market accounts, for the last three months.
- Investment and retirement accounts, such as 401(k)s, IRAs, and brokerage accounts.
- Real estate you own, including property deeds, mortgage statements, and recent property tax assessments.
- Vehicles you own, including titles and loan statements.
Income verification is another part of the preparation. Gather pay stubs from all employers for the most recent three to six months to document your gross wages. If you are self-employed, you will need profit and loss statements and other business financial records. Documentation for other sources of income, such as Social Security benefits, pensions, or rental income, must also be collected. The most current version of Form 433-A (OIC) is in the Form 656 Booklet, available on the IRS website.
Completing Form 433-A (OIC) Section by Section
Each section of Form 433-A (OIC) must be filled out completely using your gathered documentation. If a field does not apply to you, enter “N/A” rather than leaving it blank. Sections 1 and 2 capture your personal and employment details. Section 3 delves into other financial information, requiring disclosure of any involvement in lawsuits, bankruptcies, or your status as a beneficiary of a trust or estate.
Section 4 requires a comprehensive listing of all personal assets. This includes cash on hand, bank account balances, and the fair market value of real estate, vehicles, and other property. You must report the current market value of these assets, not what you paid for them, along with any associated loan balances. The difference between the asset’s value and the debt is your equity, a key part of the IRS’s calculation.
Section 5 details your total monthly income and expenses. Here, you will report gross monthly wages, self-employment income, and other earnings based on the documents you collected.
A key part of this section is calculating your allowable living expenses. The IRS does not permit you to claim your actual monthly expenses for all categories. Instead, you must use the agency’s published National and Local Standards for costs like food, clothing, housing, and transportation. These standards are based on family size and your geographic location and can be found on the IRS website. Subtracting these standardized expenses from your total monthly income determines your net disposable income, which is what the IRS considers available to pay your tax debt each month.
Assembling and Submitting the Offer in Compromise Package
After completing Form 433-A (OIC), you must assemble the full Offer in Compromise package. The primary document is Form 656, Offer in Compromise, which outlines the terms of your offer, including the proposed payment amount and schedule. A complete OIC application requires both Form 433-A (OIC) and Form 656. You must also include all the supporting documentation you gathered, such as pay stubs and bank statements. Failure to include this verification can result in the rejection of your offer.
The IRS requires a non-refundable $205 application fee with your submission. You must also make an initial payment with your offer. For a lump-sum offer, this payment is 20% of the total offer amount, while a periodic payment offer requires the first month’s payment. This initial payment is generally non-refundable and is applied to your tax debt if the offer is not accepted. Taxpayers who meet low-income certification guidelines may be exempt from the application fee and initial payment.
The completed package, including forms, documents, the fee, and the initial payment, must be mailed to the IRS service center listed in the Form 656 instructions. After submission, the IRS will send an acknowledgment letter and begin its review. The agency may contact you for more information before making a final decision.