When you apply for a payment plan, including certain types of Installment Agreements, Offer in Compromise, or Currently Not Collectible status, the IRS asks you for a financial statement, Form 433-A. This form provides information about your total income and assets. The IRS uses this information to determine your ability to pay.
When reviewing how much you can pay, the IRS takes into account:
- Any assets that you can take a loan against,
- Any asset such as your car, boat, or house that you can sell to pay the tax debt, and
- Property that is yours but is held by someone else such as funds in bank accounts, retirement accounts, etc.
The information you will need to include on Form 433-A includes:
- Your checking, savings, online (e.g. PayPal) financial accounts
- Your stored value cards (e.g. payroll card, child benefit card)
- Stock, bonds, mutual funds, and other investments
- Available credit on credit cards
- Your gross monthly wages and/or salaries without deductions, or net business income
- Any real estate, vehicles, and personal assets
- Current market value of your assets
Self-employed individuals also need to share with the IRS their business bank accounts and business assets.
As the IRS has to leave you enough for you to meet allowable living expenses, they also need to review your specific financial needs. Therefore, on Form 433-A, you will need to include your necessary total living expenses. These will include expenses on:
- Food, clothing and miscellaneous
- Housing and utilities
- Vehicle ownership and operation
- Public transportation
- Health insurance
- Out-of-pocket health care costs
- Court ordered payments
- Current year taxes
- Secured debts
- Other expenses such as student loans, unsecured debts, and tuition fee.
Total Monthly National Standards for Food, Clothing and Misc.
Based on your financial statement, the IRS determines your ability to pay and decides whether to approve your application for a payment plan or not. Under the Fresh Start, the IRS may not ask for a financial statement if you owe $50,000 or less in tax debt and apply for an Installment Agreement. For tax debts that are greater than $50,000, and to request a tax debt reduction, you will need to provide the IRS with a financial statement (Form 433-F).