IRS Form 433-A (OIC): How to Complete and When to Use It

If you’re unable to pay your past-due taxes in full and you’re considering an offer in compromise, you’ll need to first prove that you qualify for this settlement option. Less than half of all offer-in-compromise applicants are approved each year, and that’s largely due to the in-depth financial analysis the IRS conducts via IRS Form 433-A (OIC). 

This post outlines how to complete Form 433-A (OIC) thoroughly and accurately. To get help applying for an offer in compromise or completing any other tax relief forms, contact us at Seattle Legal Services today. 

Key Takeaways

• Individuals should complete Form 433-A (OIC) when applying for an offer-in-compromise.

• Be prepared to submit substantial financial documentation with this form.
• Ensure that the numbers you provide are accurate.
• Potential outcomes include requests for more information, rejection of your offer, or acceptance of your offer.
• Note that Form 433-A and Form 433-A (OIC) are not the same. Don’t file Form 433-A when applying for an offer in compromise. 

What Is Form 433-A (OIC)? 

This form is a Collection Information Statement for Wage Earners and Self-Employed Individuals. It provides the IRS with all of the information and documentation they need to determine whether or not to approve your offer in compromise request. 

When you complete the form, you will share extremely detailed information about your income, expenses, assets, and debts. 433-A (OIC) also includes a section to calculate your minimum offer, based on the numbers you provide throughout the form.

When the IRS Needs This Form

The IRS requires this form from individuals who want to settle their tax debt for less than what they actually owe. If you meet the basic eligibility criteria for an offer in compromise—current on all tax filings, not going through bankruptcy, and have made all required estimated tax payments for the current year—the next step is to fill out Form 433-A (OIC) to prove that paying in full would cause you severe financial hardship. 

What Form 433-A (OIC) Requests

Form 433-A (OIC) requests an extensive list of financial documents and a full breakdown of your financial details, including your personal and household expenses, assets, liabilities, and income sources. You’ll also need to provide business information if you are self-employed as a sole proprietor.

One key section of this form is the part that calculates your reasonable collection potential (RCP). This section takes the information you’ve provided throughout the form and figures out basically how much the IRS can reasonably expect to get from you if you they pursued involuntary collection efforts such as garnishing your wages or seizing your assets.

Form 433-A (OIC) vs. Form 433-A

It is somewhat common for people to confuse Form 433-A and Form 433-A (OIC). Although there are similarities, they are separated by key differences that highlight why it is so important to make sure you’re filling out the correct form. 

Form 433-A (OIC) is exclusively for taxpayers applying for an offer in compromise. Form 433-A is currently used for the following: 

• Taxpayers who owe a substantial amount and want an installment agreement,
• Taxpayers who need more than 72 months on an installment agreement, 
• Taxpayers who are requesting a partial payment installment agreement, or
• Taxpayers who may qualify for currently not collectible status. 

If you’ve gone over the chart and reviewed the differences between the two forms but you’re still not certain which one is right for your situation, you can reach out to the team at Seattle Legal Services to discuss your needs in greater detail.

What About Form 433-F?

Form 433-F is another IRS Collection Information Statement for individuals. You may complete this form instead of Form 433-A when applying for certain types of installment agreements. Typically, you complete Form 433-F, unless an IRS employee specifically requests Form 433-A. 

When to File Form 433-B (OIC)

If you’re applying for an offer in compromise for a business, you should file Form 433-B (OIC). Generally, the business must file this form, and all of the owners may also need to file Form 433-A (OIC). Note that this is not the same as the standard 433-B form which is used similarly to the 433-A explained above but for businesses. 

Filling Out Form 433-A (OIC)

Form 433-A (OIC) is very in-depth. This isn’t a form you can sit down and fill out without any preparation—you will need extensive documentation to complete the form, and you also must attach financial documents when you file the form. Making sure you have everything ready to go can make this process much easier for you.

Documentation You Will Need

This list includes documentation you may need to fill out Form 433-A (OIC) accurately and the documentation you have to send in to support your form:

• Copy of your most recent paystub or earnings statement from each employer, including from anyone who contributes to the household income
• Copy of your most recent statement from each investment and retirement account
• Copy of your most recent statement from other income sources, such as pensions, Social Security, and rental income
• Three months’ worth of bank statement copies for each account you have
• Six months’ worth of business bank account statements (if applicable)
• Copies of most recent loan statements from all debts, including mortgages, car loans, and other loans
• Proof of delinquent state or local tax debt and any payment plan you may be on
• Copies of child support and alimony payment orders
• Copies of trust documents as listed in Section 9
• Proof supporting any information given in the “Explanation of Circumstances” on Form 656
• Information regarding assets, including when you purchased the asset, who holds any loan secured by the asset, when your final payment is, and the asset’s current market value
• Monthly payment amounts for all debts and obligations
• Specific breakdown of your monthly household expenses

Instructions

Once you have the necessary documentation, you can begin filling out Form 433-A (OIC) by following these steps:

• Section 1 – note your basic identifying information and some information for each of the people living in your household.
• Section 2 – list your employer’s name, how long your pay period is, your job title, the duration of your employment, and the employer’s address. Indicate whether or not you have an ownership interest in the business. Do the same for your spouse’s work.
• Section 3 – list your domestic and foreign assets. You’ll begin with bank accounts, investment accounts, and digital assets before moving on to real estate and vehicles. End this section by listing any other valuable items you have. The form requires you to add up the value of the assets as listed at the end of each line, subtract the current IRS deduction, and transfer the amount down.
• Sections 4-6 – complete if you’re self-employed. Section 4 asks for the name of your business, a description of it, your business address and website, tax deposit frequency, and other business interests you have. You’ll also need to fill out Section 5, which requires you to list your business assets, and Section 6, which breaks down business income and expense information.
• Section 7 – break down your household’s income and expenses. The household income is calculated by adding gross wages, Social Security benefits, pensions, and any other sources of income. You’ll add the numbers in the far right column to get your total household income. In your monthly household expenses, you should list the average amount you spend in each category. Note that for boxes 39 and 45, list the full amount of the allowable standard, even if you use less. You’ll add boxes 39 through 51 to get your total household expenses.
• Section 8 – Calculate your minimum offer amount by plugging in your remaining income and equity in assets. This gives you the minimum offer you can make. If that amount is still too high, you will need to explain your circumstances on Form 656.

The rest of the form requests information on any pending litigation, trusts to which you are a party, and recent asset transfers. After verifying that everything is accurate, you can sign the form. The bottom of Form 433-A (OIC) includes the documents you need to send in with the form for the IRS to peruse.

Mistakes to Avoid When Filling Out Form 433-A (OIC)

Avoid these mistakes to ensure that your application is processed promptly and that you don’t have any unnecessary delays:

• Skipping parts you think are not relevant: If you do not understand a section of the form and assume it doesn’t apply to you, talk to a tax professional first. The question may be worded strangely or in a way that’s difficult to understand. You want to ensure that you provide all the information the IRS is requesting.
• Guessing the value of assets or debt amounts: The IRS does request that you round amounts to the nearest dollar, but you should not be estimating your monthly payments, equity amounts, or other important values. This can drastically change your minimum offer amount.
• Leaving out information you think is unfavorable to you: If you have a lot of equity in an asset, it may be tempting to leave it off the form and hope that the IRS does not find out about it. You must be accurate and thorough in your form to avoid potential legal action from the IRS. Lying on IRS forms is generally considered to be fraud.
• Not submitting necessary documentation: The documents listed at the bottom of Form 433-A (OIC) are not optional; the IRS requires them in order to properly assess and process your application.
• Misjudging living expenses: To get an accurate overview of your living expenses, it’s helpful to go over the last few months of bank statements to see precisely how much you’re spending on food, utilities, transportation costs, and miscellaneous items. It’s not uncommon for applicants to drastically overestimate or underestimate these expenses, leaving them with an amount that’s either inaccurately low or too high for them to afford.

The Importance of Providing Accurate Information

Even if it means you need to dig out extra forms, find old login information, and spend extra time on your Form 433-A (OIC), you must prioritize giving the IRS accurate and up-to-date information. Your minimum offer amount in Section 8 is based on the numbers you provide in the previous sections, and guessing or estimating can give you a number that is significantly lower or higher than what your offer should be. 

It is very likely that the IRS will catch these discrepancies and either request further supporting documentation—at which point you will be caught—or deny your application outright. If they believe your error was intentional, they may even recommend a criminal investigation.

Next Steps After Submitting Form 433-A (OIC)

The IRS generally spends between six and twelve months reviewing an offer-in-compromise application, although it may take longer. They start by verifying that you’ve submitted all the necessary forms and documents, as well as ensuring that you meet the basic requirements for an offer in compromise. 

From there, they move on to evaluating the documentation you provided, the accuracy of your application, and your ability to pay. This leads them to their final decision.

Potential Outcomes

Depending on the complexity of your application and the accuracy of your answers, the IRS may:

• Request additional documentation or information that will allow them to make a final decision.
• Reject your application and give you options for appeal.
• Accept the offer in compromise and reduce your tax liability.

What to Do If Your Offer Is Rejected or the IRS Requests More Information

If the IRS requests more information, gather the appropriate documentation and send it in immediately. You don’t want to miss the deadline and have your offer automatically rejected.

If your offer is rejected, look at the paperwork from the IRS. It should have information on how to appeal their decision. You need to send in Form 13711, Request for Appeal of Offer in Compromise. You can also send a letter that includes the same information in the form, although the form is generally the easier option.

Frequently Asked Questions

Can I submit both Form 433-A and Form 433-A (OIC)?

You should not submit both, since they apply to different forms of tax relief. You should first determine which type of tax relief is best suited to you and then fill out the appropriate form.

How long does the IRS take to review Form 433-A (OIC?

The IRS does a brief preliminary review to ensure that the form is completely filled out and has the required documents. After verifying this, they move on to an in-depth analysis of the form and supporting documentation. All in all, the process generally takes between six and twelve months.

What happens if my offer in compromise is rejected?

You have the option to appeal if you think the rejection was in error. You also have the chance to explore other tax relief options.

What supporting documents are required?

The IRS requests a long list of supporting documents, which you’ll find at the end of Form 433-A (OIC). They include bank statements for the past three months, the most recent statement for each of your debts, the most recent statements for your investment accounts, and court orders for court-required payments.

How does Form 433-A (OIC) affect tax resolution options?

This form plays a role in whether you qualify for an offer in compromise and, if so, how much the IRS can expect you to pay.

Get Help Applying for an Offer-in-Compromise

Understanding Form 433-A (OIC) is a critical part of submitting the strongest offer in compromise application you possibly can and giving yourself a fair shot at a lower tax liability. You should do your own in-depth financial analysis as part of this process to ensure that you are sending accurate information to the IRS.

Worried about providing accurate and thorough information? It’s time to talk to the tax professionals at Seattle Legal Services. The offer in compromise program has a relatively low acceptance rate, and we strive to help our clients send in the information and documents needed for a greater chance of IRS approval. Call us or send us a message online to schedule a consultation.