Offer in Compromise 433b
Form 433-B
If you are ready to attempt offers of compromise with the Internal revenue service, then you’ll need to provide Form 656, Offer in Compromise. When you own a business which is not a sole proprietorship (that is to say, you do not need to report income from this business on Form 1040, Schedule C, Profit or Loss From Business), you must also submit the form 433b, collection information statement for businesses, which is provided in the 656 booklet. Form 433-B will determine the lowest offer you will be able to submit to the irs as a compromise to your outstanding tax debt based on your business expenses, income, assets, and future earning potential. The Internal Revenue Service will only permit offers below this minimum amount if you present evidence of deserving special circumstances.
How to complete form 433b of the 656
Section 1: This section requests basic information, like your EIN, the identity of partners, officers, and LLC members.
Section 2: In section 2, you are to provide business asset information, including: bank accounts, investment accounts, and notes receivable. Also, here you’ll provide information regarding vehicles, equipment, and real estate.
Section 3: In section 3 you are to provide information regarding your business income, such as average gross monthly income (supported by documents).
Section 4: This portion of the 433b aims to find out the business expenses. This form seeks average gross monthly business expenses corroborated by documents from the recent 6-12 months. Yet, again, if you go ahead and supply a profit and loss report for this period, you can relay an average expense amount determined through these data instead.
If you plan to pay off the offer amount within a period of 5 months, follow the formula below.
- [ 48 x Business income in excess of expenses] Total available assets
If you choose to pay the offer beyond a five month period, your base minimum offer increases to the following amount:
- [Business income in excess of expenses x 60] Total assets available
In section 6
In portion 6, you’ll give details for example whether or not your company has filed bankruptcy before, and whether or not your company has whatever other affiliations that might owe money to your company. In this section, you will also be requested to share specifics on whether you’ve unloaded assets at a discount in the past ten years.
You can see more of our offers of compromise guide at
About Auburn CPA
Auburn CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. Since 2002, he has been the owner of Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.
