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The Form 433-a and IRS Collection Actions

When a taxpayer can’t fully pay his or her taxes, the Internal Revenue Service usually allows the taxpayer to make payments through IRS an Installment Payment Agreement, or IPA.  Depending on the amount of the tax debt, the IRS may require that a taxpayer fill out tax forms such as the file a Form 433-a as a precondition to approving an IPA.

To me, the Internal Revenue Service’s Form 433-a, Collection Information Statement for Wage Earners and Self-Employed Individuals, is a deceptively benign looking document.  The IRS asks individual taxpayers to fill out a Form 433-a when taxpayers owe back taxes, are seeking an installment payment agreement and the amount owed by the taxpayer is in excess of that permitting a streamlined agreement.  Under its Fresh Start Program, that amount is currently $50,000.00.  The form is used by the IRS to both determine the monthly amount of money it’s willing to accept for repayment of outstanding back taxes and as a tool to locate assets and assist with asset seizure in the event the taxpayer defaults on the agreement.

Form 433-a Sections

The Form 433-a is broken down into seven sections:  the first three pertain to the taxpayer’s personal, employment and other financial information; section four requires the taxpayer to disclose information about his or her personal assets, section five sets forth details regarding the taxpayer’s monthly income and expenses, and the last two sections provide information about self employed taxpayers.  IRS Publication 1854 provides detailed information about how to properly prepare a Form 433-a.

How the IRS Determines Acceptable Monthly Payment Amounts

The IRS uses the Form 433 section five information to determine the monthly amount of money it’s willing to accept from a taxpayer.  An IRS representative will compare the expenses set forth by the taxpayer in that section and compare those figures with Collection Financial Standards the IRS has previously determined are allowable for similarly sized taxpayer households.  These national and local standards are updated periodically, most recently just two days ago, on March 27, 2017.  National standards are applied to five necessary expenses: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous.  The miscellaneous allowance is meant for taxpayer expenses incurred but not included in any other allowable living expense item, or for that portion of a taxpayer expense in excess of the Collection Financial Standards not elsewhere allowed.  National standards are also applied to out-of-pocket health care expenses. Local standards, determined at the county level, are applied to housing and utility expenses.  A combination of national standards and local standards are applied to transportation expenses.

Call Mackay, Caswell & Callahan, P.C. Today

If you need help with an IRS tax form including the Form 433-a,  Collection Information Statement, or want to set up an IRS Installment Payment Agreement, contact the New York tax attorneys at Mackay, Caswell & Callahan, P.C. today.  With six New York offices, one of our NYC tax attorneys or Upstate New York tax attorneys is available to help.

by Joseph M. Callahan, Esq.