IRS Form 433-B: Instructions & Purpose of this Information Statement
IRS Form 433-B, or Collection Information Statement for Businesses, is typically used when a business owes federal taxes and cannot immediately pay them. When a company 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 company to provide documentation about its financial situation and helps the IRS determine the ability of a business to pay its taxes fully.
Completing Form 433-B
Section 1: Business Information
This section of Form 433-B asks for necessary contact information for the business, as well as essential information about the company, 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 company 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 specific information about all people who are partners, officers, members, major-shareholders, or other essential personnel of the business. It includes the person’s name, address, social security number, telephone numbers, ownership percentages and shares or interest in the company, 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:
- Business contact information for any payroll service provider or reporting agent
- Information about any lawsuits related to the company
- Information about any bankruptcy proceedings in which the business is involved
- Documentation of any debts currently owed to the company by related parties
- Information about any transfer of assets for less than full value
- Information about any other business affiliations, and
- A statement anticipating any decrease or increase in business income
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 money 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 period for which the firm is requesting a tax payment plan, temporary delay, or offer in compromise. 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 before 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 reports 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 firm 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 filed 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 firm will be given a certain number of equal monthly payments to pay the tax debt in full. The maximum time frame for an installment agreement is usually ten years, which is the amount of time that the IRS has to collect past due taxes unless the collection statute expiration date (CSED) arrives sooner.
If the IRS determines that a business cannot pay its past due taxes within a 10-year time frame, but can make some payments, the IRS may allow a partial payment installment agreement. In this situation, the business will repay a particular 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 firm a brief delay before taking further action to collect the taxes. However, the IRS will add interest and penalties to balance, and the 10-year period for tax collection 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 company is entitled to a brief pause 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 under a regular installment or partial installment payment agreement. An additional option is an offer in compromise, which allows the business to enter into different types of payment arrangements. For instance, a company can make a partial lump sum payment, short-term periodic payments over 24 months, or deferred periodic payment to be paid within ten years.
The IRS might accept a business’s proposal to enter into an offer in compromise if the company is unable to pay the entire amount of the taxes due to 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 firm provides on Form 433-B to assess the business’s eligibility for an offer in compromise and to develop the payment arrangements that are most appropriate for the firm.
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 company needs to enter into an alternative payment arrangement, a partial or full installment payment agreement, or an offer in compromise.