How to File Form 433-A

If you’re requesting an installment agreement or similar tax debt management solution from the Internal Revenue Service (IRS), you’ll need to submit Form 433-A, “Collection Information Statement for Wage Earners and Self-Employed Individuals.” This six-page form provides the IRS with detailed information about your financial situation. This information helps the IRS verify whether you’re eligible for the relief you’re requesting and determine what you can afford to pay. This article will walk you through how to complete the most recent (May 2020) version of the form. 

Note: Taxpayers who are proposing an offer in compromise — a type of agreement with the IRS to settle tax debt for less than what is owed — may need to complete Form 433-A (OIC) instead of 433-A. While the two tax forms are substantially similar, 433-A (OIC) contains additional sections to help taxpayers calculate the minimum offer amount required for an offer in compromise. 

IRS Form 433-A Section 1

Section 1, “Personal Information,” is fairly self-explanatory. This is where you’ll enter your personal information, including full name, address, marital status, Social Security number, date of birth, driver’s license number, and phone number.

If you are requesting relief jointly with your spouse, include information for both individuals in this section. If either of you claims anyone as a dependent, or if there are others in your household, you’ll need to list each dependent or household member’s name, age, and relationship to you here as well. 

IRS Form 433-A Section 2

In Section 2, “Employment Information for Wage Earners,” you’ll provide your and your spouse’s employment information. This section is intended to give the IRS an idea of your current job stability (and the stability of your income), additional means to contact you if necessary, and any information that might be needed to set up a direct payment plan. 

You should only complete this section if you or your spouse currently earn wages as an employee. (If you receive a W-2, you’re considered an employee.) Include your employer’s name and address, your job title, how long you’ve been with this employer, and how often you get paid. Likewise, if your spouse is paid as an employee, your spouse should fill in his or her employment information in the subsection marked “Spouse.” If neither you nor your spouse receives employment wages, leave this section blank.

You will also need to know the number of withholding allowances you claim on Form W-4. Check with your HR or payroll department if you’re not sure. Finally, enter your work phone number and whether the IRS may contact you at work. 

If you’re self-employed or work as an independent contractor, don’t put that information in this section; you’ll enter your income information later, in Sections 6 and 7. If you earn both employment income and self-employment income (for example, you’re considered an employee at your day job, but you also earn some side income as a freelancer), you should complete Section 2 as well as Sections 6 and 7. 

IRS Form 433-A Section 3

Section 3, “Other Financial Information,” serves as a sort of catch-all section for asset and eligibility questions that don’t fit neatly within the other sections. These include:

Are You A Party To A Lawsuit?

If so, you’ll need to enter the court information, case number, your attorney’s name, the amount of the lawsuit, the subject of the lawsuit (such as personal injury or child custody), and your best guess as to when the case will be completed. Why does this information matter? If you’re a plaintiff, winning the lawsuit could mean that you’ll have more money available to pay your taxes. If you’re a defendant, losing the case could make it harder to make your tax payments.

Have You Ever Filed for Bankruptcy?

The IRS wants to verify that you don’t currently have an open bankruptcy case, which would make you ineligible for some types of settlements. This answer also gives the IRS notice of any recent bankruptcies that wouldn’t otherwise show up during their asset investigation. If you’ve filed for bankruptcy in the past, you’ll need to know your case number, court information, filing date, and discharge or dismissal date.

In The Past 10 Years, Have You Lived Outside The U.S. For 6 Months Or Longer?

If so, you’ll need to provide a starting and ending date of your expatriation. Living outside the United States may affect your tax liability,the IRS’s collection statute expiration date (CSED), and/or how long your unpaid taxes remain collectible.

Are You The Beneficiary Of A Trust, Estate, Or Life Insurance Policy?

If so, you’ll need to provide the name of the trust, estate, or policy, whether you anticipate receiving any money, and, if so, how much. Any funds you receive in the future could potentially be used to pay your taxes.

Are You A Trustee, Fiduciary, Or Contributor Of A Trust? 

If so, provide the name of the trust and the EIN. The IRS wants to verify that you are not trying to hide assets or contributing money that could have gone toward your tax installment plan.

Do You Have A Safe Deposit Box?

If so, enter the institution name, address, and box number, plus a description and estimated value for anything in the box. A safe deposit box might contain assets that could be sold to pay toward your taxes.

In The Past 10 Years, Have You Transferred Any Assets For Less Than Their Full Value?

If so, you’ll need to disclose what was transferred, to whom, the date of transfer, and the asset’s value at the time. The IRS is checking for any fraudulent transfers or bad faith transactions (for example, transferring assets to get them out of your name so the IRS wouldn’t force you to sell them as a means of repayment).

IRS Form 433-A Section 4

In Section 4, “Personal Asset Information for all Individuals,” you’ll need to disclose all your tangible and intangible assets. Even if you believe an asset can’t be liquidated, you should still include it in Section 4 so that you cannot be accused of intentionally trying to hide assets from the IRS. 

Liquid Assets (Items 12 Through 16)

The term “liquid assets” refers to assets that are either cash or can easily be reduced to cash. Checking or savings accounts, investment accounts, stocks, and bonds are all examples of liquid assets. The IRS prefers liquid assets to non-liquid assets because it typically requires little time or expense to convert liquid assets to cash.

Cash On Hand

This includes any available cash that isn’t in a bank. Some examples might be cash in your wallet, in a home safe, stuffed under your mattress, or in a piggy bank. If you have cash in a safe deposit box that you already listed in Section 3, you don’t need to list it again here. 

Bank Accounts

Personal bank accounts, for purposes of this section, include any traditional bank accounts, such as checking, savings, or money market accounts. Online and mobile accounts, such as PayPal or Venmo, are also included. So are stored value cards, such as payroll or child support cards, and government benefit cards. For each account, enter the type of account, institution name and address, the account number, and the account balance. 

Investments

Instructions for Form 433-A specifies various types of investment assets that must be disclosed in this section, including stocks, bonds, mutual funds, certificates of deposit, and stock options. This section is also the place where you’ll need to list any commodities, such as gold, copper, or silver, and retirement accounts, such as IRAs, Keough, and 401(k) plans. Finally, if you have an interest in any partnerships, corporations, or limited liability companies, or are a director, member, officer, or owner of any business entity, disclose those interests in this section as well.

For each investment asset or financial interest, enter the type of interest, the name and address of the institution or investment company, the value of your interest or shares, the current balance of any outstanding loans such as 401(k) loans or loans against an insurance policy or margin brokerage account), and your total equity in the asset or interest. Your equity is equal to the value of your interest minus the outstanding balance of your share of the loans.

Virtual Currency (Cryptocurrency)

Disclose any interests you own in any type of virtual currency, such as Bitcoin, Ripple, Litecoin, or Ethereum. For each interest, list the type of currency, the name of the virtual currency wallet or digital currency exchange, and the email address you used to register for the exchange. You must also state where the currency is stored, such as online, in a mobile wallet, or on an external hardware device, and list the value of the currency, both in-kind (e.g., 10 Bitcoins) and in current U.S. dollars.

Available Credit

List any lines of credit and bank-issued credit cards, including the name and address of the credit-granting institution, the account number, your total credit limit, your current balance owed, if any, and the amount of credit available to you. The IRS is looking for any available credit that could be used to pay some of your tax debt.

Life Insurance

If you have an interest in any life insurance policy that has a cash value (for example, a whole life policy), then for each policy, list the name and address of the insurance company, the name of the policy owner, any outstanding loan balance against the policy, and the current cash value. The IRS is primarily interested in whether you have any policies that you could cash out to pay toward your back taxes.

Non-Liquid Assets (Items 17 Through 19)

Unlike liquid assets, non-liquid assets are not easily converted to cash. These assets may require a more substantial investment of time, money, and effort to liquidate (for example, selling a house or car). These assets also tend to have a lower market value if the IRS liquidates them versus if you sold them privately in the ordinary course of business. Many intangible assets are considered non-liquid because they often only have value to a specific class of buyers.

Real Property

In this section, list any real estate that you own, or that you are under contract to purchase, including your primary residence, if you own it, and any other land or buildings that you own. For each property, enter the property description, location, purchase date, and current market value. Note that some states classify burial plots as real property.

If there is a mortgage on the property, include the name, address and phone number of the mortgage lender, the current loan balance, the monthly payment amount, and the date of the estimated final payment. 

As with other assets, the IRS is interested in whether you own any property that you could sell to pay down your tax debt. In general, the IRS will not force a taxpayer to liquidate property if doing so would cause economic hardship. For example, you ordinarily would not be required to sell your primary residence, especially if your new rent or house payment would cost as much or more than your current mortgage payment.

Vehicles

For any cars, trucks, ATVs, ORVs, boats, motorcycles, RVs, or trailers that you own, list the year, make, model, tag number, VIN, current mileage, purchase date, and current market value. If you owe money on the vehicle, enter the lender’s name, address, and contact number, the current loan balance, the amount of the monthly payments, and the date that you anticipate having the loan paid off. The IRS typically will not force the sale of a vehicle that is necessary for your livelihood.

Personal Assets

In the next section, list all your remaining personal assets. These include:

• Personal belongings and household goods, such as clothing, furniture, jewelry, antiques, firearms, personal effects, electronics, and the like.

• Intangible assets, such as licenses, domain names, patents, and copyrights. Although intangible assets typically require a specialized buyer to sell for their full value, patents and copyrights have the potential to be extremely valuable and worth the effort of liquidation. If you own these types of intangibles, be prepared for the IRS to examine them closely.

IRS Form 433-A Section 5

Section 5, “Monthly Income and Expenses,” is where you’ll report all of your ordinary monthly income and actual living expenses. The information in this section will help you and the IRS understand how much you can reasonably afford to pay on an installment plan each month.

Income

In the “Income” portion of Section 5, enter all your and your spouse’s income from all sources, as itemized in the form. These sources include: 

• Wages

• Business and rental income

• Interest and dividends

• Pensions

• Social Security

• Distributions from retirement plans or business interests (these are normally reported on a K-1 Form)

• Alimony and child support

• All other income from any other source

For some types of income, Form 433-A requests separate entries for your income and your spouse’s income; for other types, you should combine both of your income amounts into a single entry. For all types of income, use your gross income, before income taxes or other deductions are taken out. All income types must be calculated as monthly amounts, even if your pay frequency is different. 

If you are self-employed or work as an independent contractor, you should skip ahead and complete Sections 6 and 7, then come back and complete Section 5. You’ll need to use the net business income figure that you calculate on Line 89 in Section 7 to complete Line 23 in Section 5.

Expenses

According to the IRS instructions for this section, you should list all monthly living expenses that are necessary to provide for the health and welfare of you and your family or are necessary to enable you and your family to produce income. The instructions also say that all expenses must be “reasonable in amount.”

To calculate your necessary living expenses, first go through your bank statements and other records for the past six months and determine your actual monthly living expenses. Don’t enter these amounts on the form yet. Next, review the applicable IRS standards to see what is considered a reasonable amount for each expense and how your actual expenses compare.

Standard-Based Expenses

The IRS maintains a table of national standards for the costs of food, clothing, housekeeping supplies, personal care products, and other items, based on your family size (your family size should match the number of dependents and other household members shown on your tax return and in Section 1). It also has a table that covers national standard health care expenses.

• For these items, if your actual expenses are lower than the applicable national standard, you’re allowed to claim the national standard amount. 

• If your actual expenses are higher than the national standard, you’ll likely need to provide an explanation and evidence for why the higher expense is necessary.

Similarly, the IRS has data tables that represent the standard housing and utility expenses for every county in the U.S., as well as tables for local standard transportation costs. In general, your monthly expenses aren’t limited to these standards, but be prepared to explain any higher amounts.

Other Expenses

The IRS does not have national or local standards for every type of expense, but you’ll still need to enter these expenses on 433-A. Other expenses that the IRS considers to be necessary include:

• Court ordered payments, such as child support or alimony

• Childcare costs

• Life insurance premiums

• Monthly installment payments on secured debts other than your house or car note (for example, a jewelry store line of credit or a loan to buy a riding mower)

• Estimated payments on current year federal tax liability

• Installment agreement payments toward any past-due state or local income taxes

If you have other monthly expenses that you believe are necessary, enter them on the form. You will likely need to document and explain these expenses for the IRS to allow them.

IRS Form 433-A Sections 6 And 7

Section 6, “Business Information,” and Section 7, “Sole Proprietorship Information,” should only be completed by self-employed individuals or independent contractors. In these sections, enter information about your self-employment or business assets, debts, income, and expenses. This information should align with the entries on your Form 1040 Schedule C. If you earn employment wages only, do not complete Sections 6 and 7.

Documentation

Keep copies of any documents that you use to prepare your 433-A. Also, keep any notes about how you calculated the amounts you entered on the form. It’s often helpful to organize your documents to correspond with each line of the form. Having your evidence organized and ready to go will make it easier to submit on time if the IRS requests it. If you can’t provide proof for the information reported on the form, your situation could get stressful very quickly.

Taxpayers usually need to have 6 months’ worth of each type of documentation. The following are examples of documents that you might be asked to submit:

• Pay stubs and self-employment records

• Prior-year tax returns

• Bank and investment account statements

• Loan or debt statements

• Life insurance policies

• Bills or statements showing monthly expenses

Let’s Summarize…

The purpose of Form 433-A is to provide the IRS with enough information to determine whether you are eligible for the tax relief that you’re requesting. Based on this information, the IRS could adjust your proposed tax payment plan amount or require you to sell some of your assets before entering into an installment agreement. Make sure to follow the directions that correspond to the tax year of the form you’re submitting and make sure to keep all documentation used to provide information on the form.