When a tax debtor is unable to meet his or her tax liabilities, the Internal Revenue Service (IRS) may under certain circumstances approach the tax debtor to implement a workable payment plan. In doing so, the IRS acknowledges that this is the best solution to a situation where the tax payer is unable to pay, and the IRS is unable to completely alleviate the liability owed to the government. Thus, the IRS will often seek to reach a middle ground with the tax debtor, one that acknowledges the importance of meeting tax obligations as well as the importance of providing the tax debtor with obligations that are realistic given the tax debtor’s financial situation. For tax debtor’s looking to benefit from payment plans, also known as monthly installment agreements, filling out a Collection Information Statement such as Form 433-F will be necessary.
Form 433-F is a short form filing for a Collection Information Statement that alerts the IRS to the debtor’s financial situation. Previously, this form was only used where small liabilities were at issue, but recently it has begun to be used more frequently for larger amounts, namely in circumstances where more than $100,000 is owed. Darrin Mish, “Will Filing a Form 433-F Help You?,” available at https://www.getirshelp.com/irsblog/124/will-filing-a-form-433-f-help-you/. Tax debtors use Form 433-F where they seek to avail themselves of IRS monthly installment agreements, not for Offers in Compromise. Offers in Compromise are situations where the IRS will settle with a tax debtor in extenuating circumstances, thereby substantially reducing the tax liability owed. The IRS will likely not accept 433-F for this purpose because they will want to see a more complete financial picture if they intend to settle with the tax debtor and take a larger loss. Even where Form 433-F is used pursuant to a monthly installment plan, the IRS will usually request that the monthly payments be directly debited from a debtor’s bank account, or directly garnished from wages owed to the debtor. Id.
Ultimately, filling out Form 433-F is an intrusive process, where the IRS will seek to know all the intimate details of your financial situation. While this might seem relatively straightforward, filers unfamiliar with the process may reveal far more than is necessary on the form, thereby increasing the monthly payment amount they will be responsible for under a monthly installment plan. Bear in mind that it may not be particularly helpful to speak to an IRS representative; the IRS’ goal is to increase your monthly payment amount, not decrease it. As a result, it is often helpful to consult with an experienced tax attorney before filing the form.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.