IRS Installment Agreement Options: Completing Form 433-F Collection Information Statement.

If you owe the Internal Revenue Service over $5000 or are unable to make the minimum monthly payment on your IRS balance such that it would be paid in full within 3 to 5 years, you may be asked to complete Form 433-F. You may complete the form in private or over the phone with an IRS representative. In my opinion, this is a rather nosey and intrusive form that wants to know about all of your income streams and income outlays.

For the person that owes large sums of money, it allows the representative to see exactly what you spend your money on and how much you spend on a monthly basis. It will also reveal sources of income that you might not have wanted to disclose. Conversely, for the individual on the opposite end of the spectrum, it allows them to be fitted to a payment plan that will fit their budget. The major drawback of course is that the penalties and interest continue to accrue on the unpaid balance. In some cases, when the balance is very old, or very high, if your payments are too low, the interest and penalties per month will be more than the monthly payment. Please keep this important fact in mind when looking at any monthly payment plan option.

If you find yourself in this situation, the most common complaint is that “I keep making payments but my balance keeps getting bigger rather than smaller”. Unfortunately, you only have 2 options, either make larger payments or make an offer in compromise to reduce the balance.

Proceeding straight to Section A of the form, in which any account that you can possibly name is featured here. These are the accounts in which you can liquidate and cash out in a relatively short period of time, hence the reason they are listed first. Even if you have a savings account with nothing in it, you are required to list it here. Remember that you are signing this document under penalty of perjury that the information that you are providing is true, correct, and complete. This way, you are also on the hook if you omit information as well as lie about any of the information you entered on the form.

Don’t think that if you don’t mention any asset account that the IRS won’t look for it without you being the wiser. For those that have a problem with the intrusiveness of the form and revealing their financial lives to the IRS, don’t complete this form. Keep your tax balance below $5000 by paying it down, or better yet, paying it off. If you can’t do that, make substantial monthly payments on your balance such that a financial statement would not be necessary.
Curiously enough, you are asked about the number of dependents that you claimed on last year’s return that are over 65 or under age 65 and the number of dependents that you will claim this year that are over or under age 65.

Why? In some cases, why some people owe or don’t owe can be tied into how many dependents that they claim. If they claim a large number, each dependent reduces the amount of tax due to the IRS. Some dependents are valuable enough to low income filers such that can get a refund from them of more than they paid in. This projected refund can be used to reduce the future tax balance. However, if one has a few or no dependents and they make a lot of money, they will need to have more taxes withheld, increase their deductions or tax credits, or make estimated tax payments. If not, they could find themselves in a yearly cycle of debt to the IRS.

Section B seeks information about your real estate. Every item of real estate that you own, including vacant lots and timeshares, should be represented here. To obtain an accurate valuation for the equity in your property, make sure that you include all cases in which you refinanced or took out any loan against the property. In addition, make sure that your monthly payment is accurately reflected. This exercise is twofold: First, it allows the IRS to see how much you are spending on a monthly basis with respect to the real estate and second, it gives a picture of the equity, if any, an asset that can be used for cash, under certain circumstances. You may be asked by the IRS representative whether or not you can borrow or sell anything to pay the balance owed. With the information from the financial statement, specific items can be pinpointed and targeted, for example, your IRA can be redeemed to pay your taxes, and equity in your home can be tapped to pay the balance or using your credit card to pay down your balance. In addition, your expenses can also be questioned as in the reason you pay so much for an expense that other people pay far less for. We will get into expenses a little later in the article.

Section C covers all the other assets that you might have whose value depends on many factors. Life insurance policies that have a cash value associated with them are included here. The amount of cash value is the “equity” as well as the difference between the current value of your other assets and the balance owed. Be as accurate as you can with these amounts as not to overstate the amounts. You might be asked to take the cash from a life insurance policy or sell your boat to pay your taxes. Of course, you do not want to understate either. The best method would be to thoroughly research your asset to obtain the correct value for the form.

Section D requests that you list all credit cards and lines of credit, whether department store or gasoline, even if paid in full. For many individuals, their credit card debt can make the difference in the monthly payment that they can make to IRS.

Section E is for employer information for both you and your spouse. This is required whether or not the both spouses are responsible for the IRS debt. The income information for both spouses is used to determine the amount of available income that can be used in making the IRS monthly payment amount.
Section F is for all non wage information that comes into the household on a monthly basis. Self employment and rental income, as well as child support, welfare, pension, social security income, etc. Self employment and rental income amounts should be related to the amounts shown on your tax form 1040, without taking any depreciation into account.

Section G is for monthly necessary living expenses. You may use the following link as your guide to the national standard for necessary living expenses:

National and Locality Collection Financial Standards located at www.irs.gov.
For food or medical expenses, you may use the amount from the chart based on your family size if your expenses were lower. The chart amount is the minimum allowable amount without verification. The family size used must coincide with the information on your most recent income tax return. However, if your actual expenses are higher than the national standard, you may list them, keeping in mind that expenses that exceed the national standard require verification to be sent with the form. For housing expenses, enter the amount that you actually spent.

If that amount exceeds the amount shown in the local standards for housing and utilities for your family size in the county that you reside in, you are required to send copies of receipts or cancelled checks to justify the expense. For transportation costs, expenses are broken down into expenses for those who use public transportation (Flat national rate of $182 per month), those that are making lease or monthly car payments (Flat national rate of $496 for one car or $992 for two cars), and the operating costs (gas, insurance, maintenance, etc), which depend on your geographic location. If your expenses exceed any of these amounts, get ready to attach your receipts and cancelled checks to your application as substantiation.

Other expenses, such as child care, court ordered payments (child support), and term life insurance payments, require that you attach supporting documentation to the application. Additionally, for court ordered payments, you must attach a copy of the page of the court order that shows the amount required to be paid by the court and the signatures of the affected parties.
Lastly, we come to Section H, Additional Information. Check box number 1 if you want the IRS to establish a payment plan for you based on your financial information statement. If you have an idea of what you want to pay per month and the date that you want the payment to arrive, you can complete numbers 3 and 4. If you can make a down payment on your balance to lower your balance for the calculation of interest and penalties, please indicate this amount on line 5. Most important in this section is line 2, which states that all tax forms must be filed up to date. If you have any outstanding tax forms, you will need to prepare them and send them with the application.

If you are sending this item by mail, allow 30 to 45 days for a response. If this timeframe elapsed without a response, contact 1-800-829-0922 and advise the representative that you would like to obtain the status of your Form 433F.

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