What Is Form 433-A Used For and When Is It Required?

Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, is a financial disclosure document used by the Internal Revenue Service (IRS). The agency uses the information to assess a taxpayer’s ability to pay an outstanding tax debt. This form catalogues income, expenses, assets, and liabilities to help the IRS make an informed decision regarding tax collection.

When the IRS Requires Form 433-A

The IRS requests Form 433-A when a taxpayer cannot pay their tax liability in full and seeks an alternative resolution. A primary scenario is an application for an Offer in Compromise (OIC), which is an agreement to resolve tax debt for less than the full amount owed. Individuals use Form 433-A (OIC) for this purpose, while businesses must submit Form 433-B (OIC).

The form may also be required for an Installment Agreement. While many agreements use the simpler Form 433-F, Form 433-A is often necessary in more complex cases, particularly when a revenue officer is assigned to collect a significant tax debt. The IRS uses the detailed information on Form 433-A to determine if the proposed payment plan is viable.

Information and Documentation Needed to Complete the Form

Completing Form 433-A requires gathering financial records, beginning with personal and household information like names, addresses, and Social Security numbers for your family. Wage earners must provide pay stubs from the last three months to verify gross monthly wages and deductions. Self-employed individuals must provide a detailed breakdown of their business’s gross monthly income and expenses to determine a net business income figure, similar to a Schedule C tax form.

You must list all cash and bank account information, providing the bank’s name, account number, and current balance for each. The form also requires disclosure of investments like stocks, bonds, mutual funds, and digital assets, along with their current market value. Details about any life insurance policies with a cash value are also required.

Real estate and vehicle ownership must also be detailed. For any real property, you must provide the address, current fair market value, outstanding loan balance, and monthly payment. For all vehicles, you must report the make, model, year, current value, loan balance, and monthly payment, and list other valuable personal assets like jewelry or art.

Finally, the form requires a list of monthly living expenses, including costs for housing, utilities, food, transportation, and out-of-pocket healthcare. You will need documentation, such as utility bills or bank statements, to substantiate your reported monthly costs. The IRS compares your reported expenses against its own national and local standards.

How the IRS Analyzes Your Financial Information

After you submit Form 433-A, the IRS analyzes it to determine your “Reasonable Collection Potential” (RCP). This figure is the total amount the agency believes it can realistically collect from you and is the foundation for accepting or rejecting a proposed payment plan or settlement.

The RCP calculation has two main components: your net equity in assets and your future disposable income. To determine net equity, the IRS examines the fair market value of your assets, such as real estate and vehicles, and subtracts any associated loans. The resulting amount is considered the value the IRS could potentially access through liquidation.

The second component is your disposable income, which the IRS calculates by subtracting your necessary living expenses from your gross monthly income. The IRS compares the expenses you report against its own set of national and local financial standards. If your reported expenses exceed these established allowances, the IRS may disallow the excess amount, which increases your calculated disposable income and total RCP.

Submitting the Form and Next Steps

You must mail the completed Form 433-A and all supporting documentation to the specific IRS address that requested the form or to the address listed in the form’s instructions. Verifying the correct address is important, as it can vary depending on your location and the IRS department handling your case.

Following submission, the IRS review process can take several months. During this time, an IRS employee may contact you to ask for clarification or to request additional documentation. Responding to these inquiries promptly is important to keep the process moving forward.

The IRS will issue a determination based on its analysis of your Form 433-A. You will receive a formal notification by mail informing you whether your request for an Offer in Compromise or an Installment Agreement has been accepted, rejected, or if the IRS is proposing a counteroffer with different terms.