Form 433-B (OIC): How to Complete for Businesses

As a business owner trying to reduce your tax liability, Form 433-B (OIC) will play an important role in proving to the IRS that you qualify for an offer in compromise. Form 433-B (OIC), Collection Information Statement for Businesses, provides the IRS with extensive information on your business’s finances and calculates your minimum acceptable offer. 

Accuracy and honesty are crucial in this form, as any errors—intentional or not—can result in denial of your request and even legal action against you. To get help now, contact the team at Seattle Legal Services. 

Key Takeaways

• Form 433-B (OIC) is required for businesses requesting an offer in compromise. 
• File this form with Form 656 if applying for an offer based on doubt as to collectibility.
• This form requires details about your business revenue, expenses, assets, and debts. 
• Form 433-B (OIC) is similar to Form 433-B in some ways. However, Form 433-B (OIC) includes a minimum offer calculation, which Form 433-B does not.
• To improve the chances of approval, consider working with a tax professional.

What is Form 433-B (OIC)?

Form 433-B (OIC) is a collection information statement for businesses, giving the IRS an in-depth look at your financial situation and ability to pay. Businesses must fill out this form if they want to apply for an offer in compromise based on doubt as to collectibility. 

You may need to fill out multiple relief forms for the IRS to consider your offer. In addition to Form 433-B (OIC), you also need to complete Form 656, and generally, the owners of the company will need to complete Form 433-A (OIC) as well.

Which Taxpayers Need to Fill Out Form 433-B (OIC)?

S-corps, C-corps, and partnerships requesting to settle their tax debt for less than what they currently owe must fill out Form 433-B (OIC) as part of requesting an offer in compromise. Business owners choose this route when their financial situation is dire enough that they cannot pay in full, either in one lump sum or over monthly payments.

To qualify for an offer in compromise and even be considered, a business must be current with all tax filings, not be in the process of filing bankruptcy, and make all required estimated tax payments. Generally, if your business is a sole proprietorship, you only need to file Form 433-A (OIC) when applying for an offer in compromise.

What This Form Asks For

Form 433-B (OIC) has several different sections that break down a business’s financial details, including income, expenses, liabilities, and assets. Another key part of this form combines this financial information to calculate your reasonable collection potential (RCP). Finally, the form has a long list of supporting documents required for submission.

Form 433-B Vs Form 433-B (OIC)

Although there is a significant overlap between Form 433-B and Form 433-B (OIC), these forms serve very different purposes and it’s important to ensure you are filling out the correct one for your tax situation.

How to Fill Out Form 433-B (OIC)

Filling out this form accurately and completely is key to ensuring that the IRS processes it correctly and does not automatically return it for being incomplete or reject it for including false information.

Information and Documentation to Have Ready

This is generally not a form that you can fill out without preparation. It is far more in-depth than many other IRS forms, and the more specific you can be with your numbers, the more accurate your offer calculation will be. Having these documents ready can make the process go much more smoothly:

• Profit and loss statements for the last six to twelve months
• Six most recent bank statements for each bank account owned by the business
• Information on all assets used as collateral on loans
• Statements of outstanding accounts and notes receivable
• Most recent statements from lenders on loans
• Supporting documentation for any special circumstances that would require you to deviate from the recommended loan payment amount

Instructions

When you have all of your financial documents ready, you can begin filling out Form 433-B (OIC). Here are step-by-step instructions:

• Section 1 – Fill out business information. This section asks for contact information, how payroll is processed, tax deposit frequency, and gross monthly payroll. You must also provide information on the business’s partners, officers, major shareholders, and LLC members.
• Section 2 – List the business’s foreign and domestic assets. Begin by documenting each of your investment accounts, including cash on hand, checking accounts, savings accounts, and cryptocurrency. This is also where you document notes receivable and accounts receivable. From there, fill out information on the business’s real estate, business vehicles, and other business equipment.
• Section 3 – Provide information on your business’s income. To figure out the gross monthly income, use the most recent six to twelve months of documentation you have of commissions, invoices, gross receipts, and earning statements.
• Section 4 – Using the documentation you have on hand, break down business expenses into categories like materials, inventory, gross wages and salaries, rent, and supplies.
• Section 5 – With the numbers calculated in the previous four sections, you can now calculate your minimum offer amount. This is based on your remaining income after expenses and debts are accounted for, as well as your assets and income. You can then select your offer amount, which must be more than zero.
• Section 6 – Share other information that may be useful to the IRS as they make their decision. You’ll answer questions about current and past bankruptcies, other business affiliations, any business partners or other parties who owe money to the business, and whether or not the business is party to any litigation.

When you have double-checked that the information on the form is accurate and thorough, you can sign and date Section 7. Before submitting, use the checklist at the bottom of the form to ensure that you send in all required documentation.

Common Mistakes to Avoid

Accuracy is key in the offer in compromise application process. These mistakes are common but avoidable—and making any of these errors could lead to your offer being automatically rejected or the IRS pursuing criminal charges if they believe you intentionally attempted to defraud them to evade taxes.

• Estimating assets and income: This is a cornerstone of your offer calculation, and erring in either direction can pan out poorly for you. If you overestimate your income and the value of your assets, the minimum offer amount may be far too high to be affordable for your business. If you underestimate these numbers, the IRS will catch on when they process your application, and they will either request more information or reject your offer entirely.
• Estimating debts and expenses: It’s also crucial to be accurate with your debts and expenses. Underestimating your debts and expenses may make your company appear more wealthy than it is, skewing your minimum offer amount higher. Overestimating may make it look like you are trying to defraud the IRS so you can get a lower settlement amount.
• Failing to disclose lawsuits or debts owed to the company: These legal matters can affect whether or not you qualify for an offer in compromise. These issues will come to light when the IRS analyzes your application, so be upfront from the very beginning.
• Not providing the required documentation: The IRS cannot just take your reported financial information at face value. This documentation is a required part of your application.

What Happens After Submission

After the IRS receives Form 656 and Form 433-B (OIC), they will first do a preliminary review to ensure that the forms are completely filled out and that the required documentation is present. If not, the IRS will either send the taxpayer a request for more information or return the application.

If everything appears to be in order, the IRS will move on to a more in-depth review of the paperwork and documentation. At this point, they may still request more documentation if they need more information. Upon completion of the process, they will either accept your offer to settle your tax liability or reject your offer and give you the option to appeal.

What to Do If the IRS Wants More Information or Rejects Your Offer

If the IRS reaches back out to you after your initial submission and asks you to provide more documentation and information, respond to them as promptly as you can and ensure that you send everything they request. Otherwise, they cannot move forward with reviewing your application and considering your offer.

If the IRS rejects your offer in compromise application, you aren’t out of options yet. You can appeal a rejected offer in compromise, and the IRS will send you that information with your rejection letter. You can either send in Form 13711, Request for Appeal of Offer in Compromise, or you can send a letter with the same information that the form requests. To determine whether or not you want to appeal, look closely at the Income/Expense Table and the Asset/Equity Table to see if there are specific items you disagree with.

Not sure how to respond to a rejection or a request for more information? Talk to a tax attorney to cover your bases and decide what your next step is.

Frequently Asked Questions

Can a business submit both Form 433-B and Form 433-B (OIC)?

These forms serve different purposes, so it doesn’t make sense to submit both. If you aren’t sure which type of tax relief fits your financial situation, you should first talk to a tax professional to see which option is the best fit for your goals.

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

The review process generally takes between six and twelve months, but it may take longer if the IRS is backlogged or your case is particularly complex.

What happens if the IRS rejects my offer in compromise?

You can either appeal their decision or look into other relief options, such as installment agreements or currently not collectible status.

What supporting documents are required for Form 433-B (OIC)?

Some of the supporting documents requested by the IRS include a current profit and loss statement, the six most recent statements for each bank account held by the company, records of assets used as loan collateral, and copies of statements of outstanding accounts. The entire list is included on Form 433-B (OIC).

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

It determines if you qualify for an offer in compromise and, if you do, how much you can offer. If the number is too close to what you actually owe, it may indicate that an offer in compromise is not the right option for you, indicating that you should look into other forms of tax relief.

Contact a Tax Professional Today

Form 433-B (OIC) plays an important role in the offer process for businesses hoping to decrease their tax liability. This is an in-depth form that requires time and attention to detail, so make sure you have all of the necessary financial records and documents. Working with a tax professional can help you ensure the accuracy of your application and provide the IRS with all of the information it needs. 

Find out how Seattle Legal Services can help now by calling us or contacting us online.