IRS Form 433-B: Instructions & Purpose of this Information Statement
IRS Form 433-B, or Collection Information Statement for Businesses, is normally used when a business owes federal taxes and cannot immediately pay them. When a business requests the IRS to allow it to pay taxes according to an installment plan, to temporarily delay paying taxes due to hardship, or to complete an offer in compromise, the IRS will often require the business to complete Form 433-B. The information contained within this form allows a business to provide documentation about its financial situation, and helps the IRS determine the ability of a business to fully pay its taxes.
Completing Form 433-B
Section 1: Business Information
This section of Form 433-B asks for basic contact information for the business, as well as essential information about the business, such as the date of incorporation or establishment, the type of business, the number of employees, and the monthly gross payroll. This section also asks for information about any internet sales that the business has, and the credit cards accepted by the business.
Section 2: Business Personnel and Contacts
Section 2 of Form 433-B requires you to list certain information about all people who are partners, officers, members, major shareholders, or other essential personnel of the business. This includes the person’s name, address, social security number, telephone numbers, ownership percentages and shares or interest in the business, and whether that person is responsible for depositing payroll taxes.
Section 3: Other Financial Information
This section of Form 433-B asks for other financial information about the business, including the following:
- Contact information for any payroll service provider or reporting agent used by the business
- Information about any lawsuits in which the business is involved
- Information about any bankruptcy proceedings in which the business is involved
- Documentation of any debts currently owed to the business by related parties
- Information about any transfer of assets for less than full value
- Information about any other business affiliations, and
- A statement as to whether any decrease or increase in business income is anticipated.
Section 4: Business Asset and Liability Information
Section 4 of Form 433-B requests detailed information about the business’s assets and liabilities, including cash on hand, business bank accounts, total cash in banks, contracts with the federal government, investments, available credit, real estate, vehicles, and business equipment.
Section 5: Monthly Income/Expenses Statement for Business
This section asks for the business’s total monthly income and expenses during the time period for which the business is requesting a payment plan, temporary delay, or offer in compromise with respect to its taxes. You also must designate in this section whether you use a cash or accrual accounting system for your business.
Aside from previously mentioned documentation that Form 433-B requires, you also must attach copies of the following documents for the three months prior to the date of filing Form 433-B with the IRS:
- All bank statements and investment account statements
- Lender statements regarding all assets, including monthly payments and balances, as well as copies of UCC financing statements and depreciation schedules
- Bills or monthly statements for recurring expenses such as rent, utilities, insurance premiums, telephones, property taxes, and court-ordered payments
- Credit card statements, profit and loss statements, and all loan payoffs, and
- Copies of the last income tax return filed and all attachments.
Additionally, the IRS can ask for additional documentation or attachments that are specific to a particular business.
Using Form 433-B
The IRS may ask you to complete Form 433-B if you cannot pay in full the taxes that your business owes. Whether your business is requesting to pay your taxes through an installment agreement, asking for a temporary delay in paying taxes, or seeing if you qualify for an offer in compromise, you likely must fill out Form 433-B and submit it to the IRS. Once you have submitted Form 433-B, the IRS will determine the ability of your business to make payments or to pay your tax bill in full.
A business may have to complete Form 433-B if it is a partnership, a corporation, limited liability company (classified as a corporation or other), or another type of entity. However, if you are a sole proprietor, the IRS considers you to be self-employed, and you would fill out Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals.
If the IRS allows your business to enter into an installment agreement, your business will be given a certain number of equal monthly payments to pay the tax debt in full. The maximum time frame for any installment agreement is usually 10 years, which is the amount of time that the IRS has to collect past due taxes.
If the IRS determines that a business cannot pay its past due taxes within a 10 year time frame, but can make some payments toward the taxes, the IRS may allow a partial payment installment agreement. In this situation, the business will repay a certain portion of the tax debt in equal monthly installment payments.
Form 433-B helps the IRS determine whether a business qualifies to enter into an installment agreement or a partial payment installment agreement. The amount of the installment payments varies according to the business’s income and expenses, and the amount of the taxes owed.
In some cases, a business may be experiencing a temporary hardship that makes it unable to pay a tax debt when due. Sometimes, the IRS will allow the business a temporary delay before taking further action to collect the taxes. However, the IRS will add interest and penalties to the past due taxes, and the 10-year period for collecting the taxes will not start to run until the temporary delay is over. Again, the information that a business provides on Form 433-B will help the IRS determine whether a business is entitled to a temporary delay in the tax collection process, as well as the length of any delay granted.
Some businesses may be unable to pay their tax debts in full, and cannot make payments pursuant to a regular installment or partial installment payment agreement. An additional option is the offer in compromise, which allows the business to enter into different types of payment arrangements. For instance, a business can make a partial lump sum payment, short term periodic payments over 24 months, or a deferred periodic payment to be paid within 10 years.
The IRS might accept a business’s proposal to enter into an offer in compromise if the business is unable to pay the entire amount of the taxes due to a special hardship or other circumstances, or if it believes that it will be unable to collect the full amount of the debt from the business. In this situation, the IRS will use the information that the business provides on Form 433-B in order to assess the business’s eligibility for an offer in compromise, and to develop the payment arrangements that are most appropriate for the business.
In summary, Form 433-B is a tool used by the IRS to determine the ability of a business to pay its tax debts in a variety of situations. Form 433-B might come into play when a business needs to enter into an alternative payment arrangement, a partial or full installment payment agreement, or an offer in compromise.