Form 433-A & 433-F: How the IRS Decides Your Ability to Pay
December 10, 2019
Tax debt is nothing to brush off, especially when you owe an outrageous amount. If you can’t afford your tax debt, the IRS must decide if – and how – you’ll be able to pay. What does the IRS use to make that decision? You guessed it – tax forms. In this case, the IRS uses forms like Form 433-A or Form 433-F to determine if an agreement is in your future.
How to Start Tackling Your Tax Debt
The first step toward federal tax debt relief is to contact the IRS. This can be as simple as picking up the phone to give them a call, just be prepared for wait times. You can also use a tax debt relief company to contact the IRS on your behalf. Although you can deal with your tax debt on your own, hiring a professional service can help you reach a better resolution quicker, easier, and with less stress.
Whether you go DIY or professional with your tax relief help, the IRS agent who ends up working on your case will determine what the next steps look like for you. While the IRS will need to investigate your payment ability next, how they do that will vary depending on your situation.
What the IRS Considers for Your Payment Ability
To figure out how much you can reasonably pay your owed federal income tax, the IRS must have certain financial information about you. This includes:
- Any assets that you can take a loan against (e.g. house, other property, etc.)
- Any asset such as your car, boat, or house that you can sell to pay the tax debt
- Property that is yours but is held by someone else, including funds in bank accounts, retirement accounts, and trust funds
To gather this information, the IRS will ask you to send them a form, which could be Form 433-A, 433-B, or 433-F.
How Do You Know Which Form to Use?
It’s a headache that the IRS has so many different forms that all seem to serve the same purpose. The good news is that you don’t really need to deduce which form you’ll need. At the end of the day, the IRS will determine the form they require from you.
However, it’s always good to be knowledgeable about the form you’re filling out and why. Let’s look at these three forms and note the differences between them.
IRS Form 433-A is used for both those who are self-employed and those who earn wages. If your IRS case is assigned to a Revenue Officer, they’ll likely require you complete Form 433-A.
You may deal with a Revenue Officer if you have more $250,000 in tax debt owed, you’ve mixed business and personal expenses, or you have payroll tax debt. However, Revenue Officers can still be assigned to cases without any of those characteristics.
Form 433-A is six pages long and requires a good amount of information. The information you’ll need to provide includes:
- Your name, social security number, driver’s license number, and date of birth
- Your employment information
- Any impending lawsuits, trust funds, or life insurance policies
- Any personal assets (e.g., vehicles, bank accounts, real estate)
- Business assets and gross monthly business income or expenses for those who are self-employed
- Paycheck stubs, bank statements, and credit card statements
- Monthly living expenses
Though the IRS has to leave you enough money to live (per the allowable living expenses), the agency will review your specific financial needs for monthly living expenses. There is a place on Form 433-A for you to include necessary total living expenses, including:
- 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 fees
Variation with a Purpose: Form 433-A (OIC)
If you’re interested in applying for an Offer in Compromise (OIC), you’ll need to complete Form 433-A (OIC). This form is included in the IRS Form 656 Booklet, which is used to submit a personal Offer in Compromise to the IRS. It requires much of the same detailed information as Form 433-A, but is geared specifically to get information for the IRS to consider an OIC.
If your business owes taxes to the IRS, then you’ll need Form 433-B. Form 433-B is also generally required if your case has been assigned to a Revenue Officer.
Much like Form 433-A, Form 433-B is six pages long and requires detailed accounts of your finances. The business information you’ll need to provide on Form 433-B includes:
- Your business’s name, date of establishment, type, number of employees, internet sales, and contact information
- Key individuals in the business (partners, board members, or major shareholders) and their phone numbers and social security numbers
- Any impending lawsuits, debts owed, or bankruptcy proceedings
- Business bank accounts, available credit, vehicles, total cash in banks, and other assets and liabilities
- Business’s total monthly income and expenses
If you don’t own a business that has federal tax debt, you won’t need to worry about Form 433-B.
Form 433-F is the most commonly seen collection information statement. The IRS usually uses 433-F to determine eligibility for payment plans or Currently Non-Collectible status. If your case is assigned to the IRS Automated Collection Service, you’ll likely be required to fill out Form 433-F.
Form 433-F is a simplified version of Form 433-A, with only two pages. There are fewer questions to answer. The information you’ll need to provide on Form 433-F includes:
- Contact information and social security number
- Bank accounts, lines of credit, and mutual funds
- Real estate and other assets (e.g., cars, boats)
- Credit cards owned and amount owed
- Business information if you own a business
- Employment information and non-wage household total income
- Monthly living expenses
Quick Reference Guide
No matter which form the IRS needs from you, one thing’s for sure: they’ll need some serious documentation to support the financial information you provide. Although there is certain information they can verify internally using your previous tax returns, it’s still in your best interest to have proof of all the financial information you provided. Even if the IRS doesn’t request those documents, you’ll be ahead of the game if you have everything ready to go.
Fresh Start Initiative
Based on your financial statement given through any of the forms above, the IRS determines your ability to pay and decides whether to approve your application for a payment plan or not. Under the Fresh Start Program, 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 one of the financial statements detailed above.
If you’re unsure if you qualify for any IRS debt repayment programs or forgiveness programs, our licensed tax professionals can review your specific situation to see if you qualify. We work with the IRS on your behalf, so you don’t have to navigate the complex tax laws alone.
Don’t go at it alone.
4 Ways the #PayMyTaxes Contest Could Change Your Life
January 21, 2019
We couldn’t be more excited to finally announce our first-ever #PayMyTaxes Contest. MoneySolver’s #PayMyTaxes Contest gives entrants a life-changing opportunity to have up to $50,000 in tax debt paid off. Yep, you read that right. $50,000! We’ve even been interviewed by News4Jax about this awesome opportunity.
Here are four ways that the MoneySolver #PayMyTaxes Contest could help you change your life:
1. Winning the #PayMyTaxes Contest = reduced stress and space to finally breathe.
Studies have shown that people who struggle to pay off their debts are more than twice as likely to experience depression and anxiety. But what if that struggle was lifted off your back?
If you were to win up to $50,000 in tax debt off your back, you’d be able to take much more than just a huge sigh of relief. The winner of the #PayMyTaxes Contest will be able to brush that tax debt stress off and bask in some serious relaxation.
2. Higher likelihood of avoiding unpaid tax debt risks, like wage garnishment and liens.
No one wants to face collection activities. But if the amount you owe decreases (or disappears), it’ll be easier for you to avoid the consequences of unpaid tax debt.
Of course, if you still have some tax debt left over after that $50,000 is paid off, you’ll still have to pay the IRS the remaining amount to avoid collections. However, you’ll be a little closer to freedom from tax debt!
3. Lowered tax burden, which lessens your financial load.
Paying off your tax debt in full can be nearly impossible for some people. But the winner of the #PayMyTaxes Contest will suddenly find themselves free from up to $50,000 in tax debt.
That’s a lot of money that you’ll no longer have to pay, which means a much lighter financial load for you in the long run.
4. Lessened financial load = more freedom.
No more worrying about how your tax debt might affect your spouse or what happens with your tax debt when you die. With less of a financial burden on your shoulders, you’ll be able to explore the things you love and stop worrying about your tax debt.
Instead of having to pay $50,000 towards your IRS tax debt, you’ll be able to use that money to live your life. The cash that you would’ve used to pay the IRS could go towards something much more meaningful to you. And honestly, if given the choice, wouldn’t you rather spend $50,000 on yourself than on your tax debt?
So, what are you waiting for? With the chance to win $50,000 towards your tax debt and change your life, send in your application for the #PayMyTaxes Contest before the deadline of May 31, 2019. We’ll be notifying the lucky winner on or around July 4, 2019.
Click here or click through the image below to learn more and apply.
Will My Spouse’s Tax Debt Affect Me?
August 18, 2018
Marriage is a lot of work. Once you say your “I Dos,” you start to realize just how much more you have to learn about your spouse. Sometimes getting to know your spouse better can be great. Maybe you discover they are an amazing pastry chef or can handle stressful situations with astonishing grace! But other times, getting to know your spouse better can be a little bit more alarming. For instance, what if you discover they have extensive tax debt with the IRS? Even if you are the picture of taxpayer perfection, your spouse’s tax debt and previous history with the IRS can affect you. No matter how much you love your spouse, it’s important to know how their tax debt can impact you.
Can my spouse’s tax debt affect me?
Did you file your return jointly with your spouse? If so, and if your spouse owes back taxes or other federal debts, it can affect your refund. The interested agency can try to recover the debt using your tax refund if they are unable to do so using your spouse’s.
How do I protect my refund?
Why should you lose out on your refund because of your spouse’s mistakes? If you do not want your refund to be taken away to satisfy your spouse’s tax debt, you can file for Injured or Innocent Spouse Tax Relief. This is an IRS relief program that releases spouses from the responsibility to pay a debt entirely owed by their spouse. You can file for Injured Spouse Allocation by completing Form 8379.
How do I retrieve my refund?
Even if your refund has been taken due to your spouse’s tax debt, you may be able to retrieve it by filing for Injured or Innocent Spouse Relief. The following must be accurate to recover your refund:
- You filed a joint tax return with your spouse.
- The return had a refund due, all or a part of which was applied to satisfy your spouse’s debt.
- You reported income (from any source) on the tax return.
- Your spouse owes the entire debt.
- You made estimated tax payments or had your income withheld for paying taxes, and/or you claimed the Earned Income Tax Credit (EITC) or other refundable tax credits on the joint return you filed with your spouse.
You can file Form 8379, Injured Spouse Allocation with your tax return. If you are filing for Injured Spouse relief with your return, it may delay your refund as a result; the IRS will need time to review your return and process your request for relief. It might take up to 14 weeks for your refund to reach you.
If you have already filed your return, you may then file the form separately. The IRS takes around eight weeks to process Form 8379.
If you don’t qualify for Innocent Spouse Relief and are held liable for the due balance, contact one of our experienced tax consultants. We are well-equipped to find an alternative solution for you to resolve your tax issues.
Is Your Passport at Risk Because of Tax Debt?
July 30, 2018
Traveling around the world is already hard enough – and now for those with tax debt, it’s even harder. The IRS is now enforcing procedures that will put your passport at risk if you have “seriously delinquent tax debts.”
How Is My Passport at Risk?
Though the law behind this plan has been in place for over two years, the IRS is now implementing and enforcing the policy. The 2015 Fixing America’s Surface Transportation (FAST) Act states that the IRS can send notice to states to deny, limit, or revoke your passport if you owe delinquent taxes.
Under the FAST Act, an individual has “seriously delinquent” liability if:
- The IRS has assessed the debt,
- The debt is over $50,000 in back taxes, penalties and interest, and
- The IRS has filed a lien to secure the liability or the IRS has issued a levy to recover the liability due.
This amount of debt may seem hard to accumulate. However, one mistake or ill-advised taxable event can land you there quickly. In the same way, failing to plan for your self-employment income or defaulting on a secured loan can cause the debt to pile up. Fortunately, there are ways to prevent having your passport revoked, even if you meet the criteria above.
How to Avoid and Resolve Losing Your Passport
Passport revoked? It’s not the end of your travels. The IRS and State Departments can reinstate your passport if it has been suspended. However, they will only do this if you’ve paid back your debt or made plans to do so.
Your passport will not be revoked under the following exceptions:
If you received a notice of passport revocation before you established a formal resolution with the IRS, you can resolve it – but it won’t be overnight. Paying your debt back in full is the quickest way to release your liens and get your passport back, but that might not be an option for you.
Resolve the Issue with Professional Help
You can enter into an installment agreement with the IRS, which can take 30 days or longer to process. A successful Offer in Compromise will also reinstate your passport; however, this can be a very lengthy and in-depth procedure with strict guidelines. Unfortunately, Currently Not Collectible status (proof of hardship and inability to pay your debt), will not grant you the passport back.
MoneySolver knows how to deal with the IRS red tape. We can quickly show proof that you’re getting help with your tax debt situation. Avoid having your passport at risk due to aggressive IRS actions and get your life (and travels) back on track.
Here’s What to Do with an IRS Notice of Deficiency
What is an IRS Notice of Deficiency (CP3219A)?
Your taxes are filed, and you’ve finally kicked back in hopes for a compliant tax year. But what happens when things don’t line up with your taxes? An IRS Notice of Deficiency, or Notice CP3219A, means there is a discrepancy in your tax information. This IRS notice lets you know that the information you reported on your tax return is different than what third parties, such as your employer or financial institutions, have reported to the IRS. The IRS will make the change to the amount of tax you owe based on the third-party reports automatically.
Agree with the changes? Great!
If you agree with the changes made by the IRS and you have no additional income, credits or expenses that you need to report, you’re all set. You don’t need to amend your return. All you have to do is sign the notice using Form 5564, Notice of Deficiency – Waiver and send it to the IRS. If you have additional income, credits, or expenses, amend your tax return and file Form 1040-X.
What to do if you don’t agree with the Notice of Deficiency
If you disagree with the notice, contact the IRS over the phone or send a written explanation supporting your position. You can also contact the third party that reported the information in question (e.g. employer) and ask them to correct it. The IRS will let you know how long you have to contest the notice. Don’t have your return handy to compare? Request a copy of your tax return from the IRS by sending Form 4506.
Be aware that the IRS will charge penalty and interest on the taxes that remain to be paid if the liability has increased. Immediately address the changes, and if they’re correct, pay the balance to resolve your back taxes ASAP.
Can’t pay the tax liability?
You can apply for an IRS tax debt payment plan. After receiving the Notice of Deficiency, try to resolve the issue immediately. Penalties and interest are charged on unpaid taxes every month until the entire amount of tax debt is paid in full. In other words, you could be paying a lot of extra dollars for your tax liability.
You don’t have to go through foggy tax issues alone. Reach out to a tax professional if you’re unsure how to approach an IRS notice, or if you can’t pay your tax liability. Without addressing it early on, you’ll receive additional notices that will eventually end in IRS collective actions.
The Top 5 Ways to Pay IRS Tax Debt in Full
July 20, 2018
Taxes are a sure thing if you live in the U.S. And when you owe Uncle Sam money, it can make a ding on your finances – and everyday life. That’s why if you owe, you must pay IRS tax debt ASAP.
Thankfully, the IRS offers several programs and services that help taxpayers that owe them money. The method you choose will depend on your specific situation with the IRS. Knowing what to do isn’t always easy. First, analyze your situation and organize all of your financial documents. From there, you can determine if one of these payment methods applies to your situation.
The top 5 methods to find a way to pay IRS tax debt:
1. Repay the full tax debt amount
The fastest and most efficient way to repay the debt you owe to the IRS is to pay the complete amount you owe. This is not an option for many who owe the IRS, which is why the IRS provides other programs and services to make paying your debt possible. Speak with a tax professional to see which IRS payment agreements you may qualify for.
2. Sell your assets (before the IRS takes them)
You may have to say goodbye to your yacht or untouchable sports car if you owe the IRS. By selling assets, you can apply the funds to pay IRS tax debt. Do this as soon as possible before the IRS issues a lien. A lien will make it more difficult to sell your property if you wait too long.
3. Withdrawal from your investment accounts
Do you have any investment accounts like a pension or 401k? If so, you could make an early withdrawal to pay off your debt. If you opt for this route, make sure you pay taxes on the withdrawn money or you could owe the IRS all over again.
4. Dip into property equity
Depending on the housing market, it may be difficult to take out a home equity loan or to refinance. If it makes sense for your situation and the market climate, applying home equity funds can be a viable method for paying your tax debt.
5. Use a credit card or bank loans
Using credit cards or bank loans may seem like merely trading one debt for another. However, the interest rate on credit cards and bank loans tend to be less than IRS interest and penalties.
Don’t wait until the letters pile up
When the IRS sends you a notice to demand federal payment, it’s time to kick it into gear. The IRS wants you to fully pay the debt within 10 days of the notification. This is doable via any of the five methods above to repay your tax liability. If you’re unable to use these resources or have a tax debt amount that you know you can’t pay, a tax professional can negotiate with the IRS on your behalf to reach an agreement. Don’t wait until your next notice letter hits the mailbox to pay IRS tax debt in full!
The Truth About the IRS’s Private Debt Collection Agencies
July 19, 2018
The IRS has called for backup from the private sector. What does this backup look like? Four private companies that could be coming after your tax debt in lieu of the IRS. Here’s what you need to know about private debt collection agencies (PDCs) to stay informed, lawful and safe.
What’s the deal with Private Debt Collection Agencies (PDCs)?
PDCs aren’t rookies to the federal tax debt collection game – they assisted the IRS in both 1996-1997 and 2006-2009. Despite warnings from the IRS and National Tax Advocate on the unsuccessfulness of these previous efforts – wasting money, yielding half the amount of collections, and contributing to inequities in the U.S. tax collection system – it seems that history is repeating itself.
Congress passed Fixing America’s Surface Transportation Act (FAST Act) in December 2015. The FAST Act includes a section requiring the IRS to use PDCs for outstanding tax debt that the IRS is no longer pursuing. Now, the program is in full swing. The IRS has hired four PDCs: Conserve, Pioneer, Performant Recovery, and CBE Group. Not all tax debt cases are eligible for PDCs to handle (e.g. offer-in-compromise, innocent spouse cases, deceased). However, you may be getting a notice that your account will be in new (private) hands.
What are the risks associated with PDCs?
The problems don’t necessarily lie with the PDCs themselves, but the program’s loopholes. Here are some of the dangers associated with private debt collection:
- Scam magnets. More scam artists can pretend to be PDCs, especially because PDCs aren’t required to identify themselves as IRS contractors. Here’s a smart rule of thumb: Do not disclose any personal information to someone randomly demanding payment over the phone or internet.
- Elevated risk for low-income taxpayers. PDCs have an agenda to push people to make payments, even if the taxpayers can’t afford it. This can create economic hardship for people who would otherwise qualify for alternative payment plans by the IRS. National Taxpayer Advocate reports half of taxpayers outsourced have incomes of less than 250 percent of the federal poverty level (FPL) and nearly a quarter are at less than 100 percent of the FPL. The result is low-income, elderly, and income-restricted individuals are buried deeper in economic woes and unpayable debt.
- A lack of consumer awareness. The IRS wants consumers to know what’s up, but public awareness campaigns are minimal at best due to drastic IRS funding cuts. As a result, consumers are left in the dark and even more vulnerable to scams.
What you need to know to protect yourself:
- How the IRS works – The IRS isn’t like your crazy ex. The agency will never call or text you out of the blue to demand payment. Instead, they will send you notices in the mail that progressively increase in urgency to act. If they have assigned your case to a PDC, the IRS will let you know so it won’t surprise you.
- Don’t pay the PDC directly – Though the IRS hired the PDC to collect your debt, you’re not actually writing out your check to the PDC. All your repaid debt will go straight to the IRS as usual.
- Consult with a licensed tax professional – Turning to a licensed tax professional, which may include CPAs, enrolled agents or tax attorneys, can give you the support and direction you need regarding your tax debt. These experts can negotiate with the IRS on your behalf to relieve tax debt or tie-ups like liens, levies and wage garnishments.
While the lawfulness of PDC use is under scrutiny, it is today’s reality. The key to avoiding trouble is being smart about tackling your tax debt and not going at it alone.
Remember: It’s crucial that you never disclose information to someone calling or messaging to collect immediate payment. Instead, call the IRS directly to see if you owe taxes.
Tax Balance Due: 3 Steps to Address IRS Notice CP14
July 16, 2018
Unfortunately, filing your tax return isn’t always your only contact with the IRS for the year. If the federal tax agency finds errors on your return that lead to an assessment, they will send Notice CP14 for collection. This isn’t a time to freak out as long as you follow the appropriate steps to address the issue.
If applicable, you’ll receive your “balance due” notice within four weeks of your return being processed. This letter is the first contact from the IRS to collect overdue taxes. If you ignore or neglect to pay what’s owed, then the IRS sends additional notices and begin aggressive collection actions, like liens and levies. Here are three steps to take when you get your “balance due” notice:
1. Review the Notice CP14 Details
The first thing to do when receiving Notice CP14 is to know why you received it. The notice includes the following:
- The tax year for which taxes are due
- The notice issue date
- Your Social Security Number
- IRS phone number
- Tax amount owed
- Payments and credits
- Penalties charged on taxes owed
- The final amount due to be paid
- The deadline for paying the amount owed
The Notice CP14 also includes information on payment options, penalties, and interest.
2. Determine If the IRS Is Correct
Before agreeing or disagreeing with the Notice CP14, check to see if your return had errors that led to the assessment of taxes due. If you find errors, you will need to pay the amount owed before the payment deadline in order to avoid further penalties and interest.
If you don’t see any errors or you find a different amount than what the IRS determined, you can call the IRS on the phone number indicated on the Notice CP14. An IRS representative will assist you in resolving the issue.
3. Pay the Amount Due
You can make the payment indicated on the Notice CP14 using IRS Direct Pay, a service that allows you to electronically pay your taxes directly from your savings or checking account. Alternatively, you can pay by credit or debit card.
If you can’t pay the full tax owed, either send a request to the IRS to receive up to an additional 120 days to pay or set up an Installment Agreement payment plan. An Installment Agreement allows you to pay your tax bill in fixed monthly installments. Get help from a tax relief professional before requesting your Installment Agreement to ensure you get the best tax debt resolution for your situation.
Why Was My Refund Applied to Back Taxes?
May 27, 2018
Waiting for your refund check can make you feel as excited as a kid the day before your birthday. When you get that envelope from the IRS, you’re ready to tear it open and reveal your hard-earned money. But what does it mean when, instead of your refund check, you get a notice informing you that the IRS applied your refund to unpaid taxes? This happens when the IRS finds that you owe back taxes. They automatically use your refund amount to satisfy the full amount or a part of your tax debt.
What is this notice?
The IRS sends Notice CP49 to inform you about how much tax you overpaid over the last year (i.e., the amount of your refund) and how much of it the IRS used to fulfill your tax debt.
The Notice CP49 means that you have a tax debt or there are other federal taxes that have remained unpaid. If your refund money covered for the entire tax debt, then you don’t need to take further action. If your refund money didn’t satisfy your entire tax debt, then you can either pay the remaining balance in a lump sum or qualify for a payment plan.
Why was my refund applied to back taxes?
Many times, the IRS discovers that a taxpayer is under tax debt after they review their information and make changes to the tax return. In such cases of underpayment of taxes or owing of other tax debts, if the taxpayer has a refund, the IRS will apply the refund to the tax debt.
Simply put, if the IRS discovers that you have any unpaid federal taxes, they will satisfy the maximum amount of debt using your tax refund.
What if my refund didn’t cover the full amount of my tax debt?
Do you still owe federal taxes after the IRS used your refund? And can you not pay the balance in a single payment? Then you can use an Installment Agreement to pay the remaining tax debt in monthly installments. If your financial condition does not allow you to pay the balance, then you can consider applying for tax debt reduction plans such as Offer in Compromise or Partial Payment Installment Agreement.
Already making payments to the IRS under a payment plan? Great! You should continue to do so. The IRS will apply your refunds to your tax debt until your entire tax debt is paid off.
What if I do not have tax debt?
If you don’t have a tax debt, then you should immediately contact the IRS to correct their mistake. Your CP49 notice should have a toll-free number in the top right corner that you should use to call the IRS. Make sure you have your paperwork – including any canceled checks and amended returns – ready when you call.
Did you file jointly with your spouse? It’s also possible that the IRS applied your refund to your spouse’s tax debt. If so, you have options to claim your share of the refund.
Was your refund applied to back taxes? Don’t fret! Give us a call and we can help you figure out the best way to resolve your tax debt problem.