It’s best not to ignore your tax debt. It will continue to build up and make your situation worse. To find help from the IRS, they will have to determine if you can pay.
They will then have to figure how much you can pay. The Internal Revenue Service uses collection statement IRS forms, namely Forms 433-A and F, to decide if you are eligible for a payment plan or installment or settlement agreement. Here we will explain what these forms are, how they are similar, and how they differ.
How To Pay Off Tax Debt
Before the Internal Revenue Service can determine your ability to pay your tax debt, you must contact them. While the wait times are long, it’s important to reach out to them in person. They will use an IRS form to collect the information they need to assess your financial situation.
Once you have, they will use asset, property, and income information to decide on your eligibility for an installment agreement or some other settlement. They will use form 433 – A, B, or F. In this post, we will focus on 433-A, 433-A OIC, and 433-B.
IRS Form 433-A
Form 433-A is used for wage earners and the self-employed. This Collection Information Statement for Wage Earners and Self-Employed Individuals is for taxpayers that cannot pay their taxes in full. This six-page form requires you to provide the following information as a financial statement of sorts:
- Your identifying and contact information, including your full name, social security number, driver’s license number, and date of birth, phone number
- Your employment information to determine your income
- Any lawsuits, trust funds, or life insurance policies that exist
- Your personal assets like automobiles, real estate, or bank accounts
- Your business assets and the gross monthly income of the business
- Expenses for the self-employed
- Your paycheck stubs, bank statements, and credit card statements
- Your monthly living expenses
The IRS will allow you to keep the money to survive defined as allowable living expenses; they will review these needs. On the form, you will outline your living expenses, including your:
- Food and clothing
- Housing costs
- Utility costs
- Automobile ownership and operation costs
- Public transportation costs
- Health insurance costs
- Out-of-pocket health care costs
- Payments ordered by the courts, including child support
- Your current year taxes
- Your secured debts
- Any student loans, unsecured debts, and tuition fees
IRS Form 433-A OIC
Another version of Form 433-A is the 433-A Collection Information Statement for Wage Earners and Self-Employed Individuals. This form is for those applying for an Offer in Compromise (OIC). This form is completed when you negotiate an offer with the Internal Revenue Service. It includes the information on 433-A, but it’s geared toward determining your eligibility for an OIC.
IRS Form 433-F
This form, the Collection Information Statement, is commonly seen and is used to determine your eligibility for a payment plan or to determine if you qualify for Currently Non-Collectible status. There are only two pages to complete and fewer questions than Form 433-A. For Form 433-F, you will need to provide:
- Your contact and identifying information
- Your social security number
- Your banking information
- Your lines of credit
- Any mutual funds
- Real estate and asset information including rental property, residences, and vacation homes, cars, and boats
- Credit card information and the amounts owed
- Your business information if you are a business owner and the number of employees
- Your employment information
- Your non-wage household total income from alimony or child support
- Your monthly living expenses including rent, mortgage, food, utilities
The Major Differences
The major difference between IRS Forms 433-A and 433-F includes the length, with the first being six pages and the second being two pages. This may be helpful when deciding on what direction you will go.
What is the IRS Fresh Start Program?
Another option you will hear about when speaking to the Internal Revenue Service is the IRS Fresh Start Program. This term is used to group all IRS debt relief options. The program helps taxpayers alleviate tax debt and penalties.
Options include reducing or freezing your debt. Other options allow you to pay smaller amounts over a determined length of time. The financial situation of each individual determines the repayment and relief options available.
Launched in 2011, it has helped many taxpayers get back on the right foot. It is designed to implement reasonable payment options instead of adding penalties. The IRS Fresh Start Program has helped taxpayers avoid liens, levies, wage garnishments, and jail sentences.
The program is beneficial to the IRS because they can collect some amount from those who owe back taxes. The four options include:
- Offer in Compromise (OIC)
- Installment Agreement (IA)
- Currently Non-Collectible (CNC)
- Penalty Abatement
The IRS Fresh Start Program will require that you meet with a tax professional to determine the right option for you. With your detailed financial information, they will decide if you qualify for the program. The program is available to everyone, but it can be complex. You also have to be current with your tax returns before consideration. To qualify for the IRS Fresh Start Program:
- Those self-employed individuals must prove they have had a 25% drop in net income.
- Joint filers must earn $200,000 a year or under
- Single filers must earn $100,000 a year or under
- The balance of your tax debt must be under $50,000 by the end of the year.
You must apply for the option you believe applies to your situation. Understand that the IRS still charges interest on tax, penalties, and interest until you have paid your balance in full. Once you apply and are approved, you will set a plan with either monthly payments, a lump sum, or deferred payments.
The IRS Tax Relief Network helps taxpayers navigate the IRS Fresh Start program and the forms required to qualify. We can help you determine your penalties and interest, help you choose the best option for your situation, and walk you through the process of applying for relief. Our lengthy experience with the IRS will help you improve your chances of qualifying. Contact the IRS Tax Relief Network today to get the help you need.
