Form 433-B is a critical document when applying for an Offer in Compromise with the IRS for your business. This form provides the IRS with detailed information about your business’s financial situation to determine the minimum offer you can submit.
Here’s a step-by-step guide to filling out Form 433-B:
Section 1: Business Information
- Identify Your Business: Provide your business’s Employer Identification Number (EIN) and the frequency of your tax deposits.
- List Associated Parties: Identify all partners, officers, LLC members, and major shareholders involved in your business.
Section 2: Business Assets
- Disclose Your Assets: List your business’s bank accounts, investment accounts, notes receivable, real estate, vehicles, and equipment.
- Exclude Equity: Remember that you can exclude your equity in income-producing assets when reporting their value.
Section 3: Business Income
- Provide Average Monthly Income: Report your average gross monthly business income based on documentation from the past 6-12 months.
- Consider Profit and Loss: If you have a profit and loss statement, you can use that to report your average monthly profit instead.
Section 4: Business Expenses
- Report Average Monthly Expenses: Provide your average gross monthly business expenses based on documentation from the past 6-12 months.
- Use Profit and Loss: As with income, you can use a profit and loss statement to report your average monthly expenses.
Calculating Your Minimum Offer
Form 433-B will calculate your minimum offer based on the information you provide in Sections 3 and 4. The calculation method depends on whether you plan to pay your offer in full within five months or over a longer period.
- Five-Month Payment: Minimum offer = (Business income – Business expenses) x 48 + Total available assets
- Longer Payment: Minimum offer = (Business income – Business expenses) x 60 + Total available assets
Section 6: Miscellaneous Information
- Address Bankruptcy: Indicate whether your business has ever filed for bankruptcy.
- Disclose Affiliations: Report any related parties or affiliations your business has.
- Provide Litigation Details: Share information about any litigation involving your business.
- Report Asset Sales: Indicate if you’ve sold any assets at a discount within the past 10 years.
Remember: Filling out Form 433-B accurately is crucial for the success of your Offer in Compromise application. If you have any questions or need assistance, it’s recommended to consult with a tax professional.