Why Form 433‑A/B matters

When the IRS asks for a Collection Information Statement, they want a clear, verifiable snapshot of your finances. The information on Form 433‑A (for individuals and self‑employed taxpayers) or Form 433‑B (for businesses) directly affects decisions about installment agreements, offers in compromise (OIC), and whether the IRS will designate your account as currently not collectible. Accurate, well‑documented forms shorten the review process and improve outcomes. (See the IRS pages for Form 433‑A and Form 433‑B for form details and filing instructions.)

In my practice advising individuals and small businesses for over 15 years, I’ve seen properly prepared Collection Information Statements convert cases that looked hopeless into manageable payment plans. Conversely, incomplete or unsupported submissions often lead to denials, collection actions, or appeals that cost time and money.

What information do the forms require?

The forms collect three broad categories:

  • Assets: bank accounts, retirement accounts, vehicles, real estate equity, business assets.
  • Income: wages, self‑employment receipts, rental, investment income, guaranteed income sources.
  • Expenses: fixed (mortgage, rent, car payments, insurance) and necessary living expenses; business operating costs on Form 433‑B.

Form 433‑A includes worksheets to calculate reasonably collectible income (RCI) and allowable living expenses. Form 433‑B requires business cash‑flow details and schedules for payroll, accounts receivable, and inventory.

IRS links: About Form 433‑A — https://www.irs.gov/forms‑instructions/about‑form‑433‑a; About Form 433‑B — https://www.irs.gov/forms‑instructions/about‑form‑433‑b.

Step‑by‑step preparation checklist

  1. Read the form instructions first. The IRS provides line‑by‑line guidance; following it prevents common errors.

  2. Collect documentation before you start:

  • Most recent pay stubs (30–90 days)
  • Last 2‑3 months of bank statements (personal and business)
  • Recent utility, rent/mortgage, and insurance bills
  • Proof of other income (rental, social security, unemployment, child support)
  • Copies of statements for retirement, brokerage, and other investment accounts
  • Business profit & loss statements, tax returns, and year‑to‑date cash‑flow reports (for 433‑B)
  • Recent appraisal or mortgage statements for real estate
  • Vehicle titles and loan statements

  1. Use current monthly figures. The IRS evaluates your present ability to pay using up‑to‑date numbers; stale figures can misrepresent your situation.

  2. Be precise on allowable living expenses. The IRS allows certain national and local standards for food, clothing, and transportation. For some categories, you must explain unusually high expenses and supply documentation.

  3. Calculate available monthly income: Income minus allowable expenses equals what the IRS considers available for payments. For Offers in Compromise, this number helps set an offer amount; for installment agreements, it informs the monthly payment the IRS will accept.

  4. Attach supporting documents. Don’t send only the form. Attach clear copies (not originals) of statements and bills. Flag or order documents to match form line items.

  5. Double‑check for omissions and signatures. Missing pages, unsigned forms, or inconsistent numbers cause delays or rejections.

  6. Keep your records. Retain copies of the completed form and all attachments; the IRS may request additional proof during the review.

Practical tips that improve results

  • Start early. Building a clear, documented submission takes time.
  • Group documents. Create a one‑page cover sheet listing attachments and the page or line they support.
  • Reconcile bank statements to income entries. If deposits exceed reported income, prepare a short explanation (gifts, transfers, business receipts).
  • Use conservative values for asset equity. The IRS values liquidation or reasonably collectible equity when considering offers in compromise.
  • If self‑employed, prepare a current profit & loss and separate personal expenses from business costs. The IRS reviews both business cash flow and owner‑draws when assessing payments.
  • When possible, identify discretionary spends to cut — the IRS may expect reductions in nonessential expenses if you want favorable terms.

In my experience, clients who present a reconciled ledger or a short narrative explaining irregular income cycles (seasonal sales, recent job loss, medical emergency) reduce follow‑up questions and speed decisions.

How the IRS uses Form 433‑A/B

  • Installment agreement: The IRS uses the form to verify proposed monthly payments are reasonable. For certain streamlined installment agreements, the IRS may require less documentation, but full forms are needed if the debt is large or the taxpayer requests specific terms.
  • Offer in Compromise: The IRS uses the Collection Information Statement to calculate your reasonable collectible equity and monthly income to determine the lowest acceptable offer. See our guide on Preparing the Financial Statement for an Offer in Compromise for OIC‑specific tips and examples.
  • Currently not collectible (CNC): If your verified monthly expenses exceed income, the IRS may temporarily suspend collection. Accurate statements are essential to establish CNC.

For help choosing between options, review our piece on Choosing Between an Installment Agreement and Offer in Compromise which walks through scenarios where one route is preferable.

Common mistakes to avoid

  • Rounding down income or omitting occasional revenue (bonuses, freelance gigs). Report all income sources and document them.
  • Failing to update values (bank balances, recent bonus payments, sale of an asset). The IRS expects current data.
  • Submitting unsupported or poorly organized attachments. If a bank deposit is listed as income, include the statement and a brief explanation.
  • Listing excessive “necessary” expenses without documentation. The IRS uses its standards and will question outliers.
  • Not disclosing all assets. Hidden assets discovered later can trigger penalties and criminal exposure for willful evasion.

What to expect after you submit

  • A revenue officer or IRS examiner will review your file. They may call to verify numbers or request additional documents.
  • Expect follow‑up: typical clarifying requests include pay stub verification, bank reconciliations, and explanations for irregular deposits.
  • Timelines vary. Simple cases can be resolved in weeks; complex business reviews may take months.
  • If your submission is rejected, you can appeal or provide additional documentation. Early engagement with a tax professional can help frame an appeal or prepare a corrected submission.

Example: simplified individual case

Monthly net income: $3,500
Necessary monthly expenses: $3,200
Available for IRS payment: $300

If these numbers are documented (pay stubs, rent/mortgage, utilities, insurance), the IRS may accept a lower monthly installment or grant CNC if significant medical bills push allowable expenses above income.

When to get professional help

Hire a CPA, enrolled agent, or tax attorney if:

  • You have complex business cash flow, multiple rental properties, or significant equity in assets.
  • You suspect the IRS will demand liquidation of assets to pay the tax.
  • You plan to submit an Offer in Compromise and want a defensible calculation of RCI and equity.

A qualified practitioner can prepare reconciled statements, communicate with the IRS on your behalf, and advise on negotiation strategy. In my practice, engaging a professional early prevented costly mistakes and reduced audit‑style follow‑ups.

Frequently asked questions (short)

Q: Can I submit a handwritten form?
A: Yes, but typed forms with clear attachments reduce errors and are easier for examiners to review.

Q: Do I need to include tax returns?
A: Yes. The IRS often requests recent tax returns to reconcile reported income vs. tax filings.

Q: Will filing Form 433 stop collection action?
A: Filing does not automatically stop levies or liens. It may prompt review, but you should request a Collection Due Process hearing or consult counsel if collections are imminent.

Sources and further reading

Professional disclaimer: This article is for educational purposes and does not constitute tax or legal advice. For personalized guidance tailored to your facts, consult a qualified tax professional or attorney.