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Sunday, December 16, 2012

IRS -- Stopping Collections and the awesome 433A (or 433F) form

Ho Ho Ho! It's getting right around the end of the year now, and that means the dreaded specter of taxes! Everyone is ready, right!? Well, perhaps. But if you are like many of our clients, you're more worried about the past than the future. Past IRS tax debt can be a monster. In this article, I'll discuss one tool in the arsenal of tax attorneys -- the 433! IRS form 433 is a collections information form, and completing it, along with substantiating documentation, is the first step to getting things "right" with the IRS. So..what exactly is this IRS 433 form? Glad you asked!

In the days of yore, the IRS was little interested in whether you had money or not. If you did not pay your taxes, the Service would just "swoop" in and take everything. Furniture, cats, small children -- all your money, bank accounts, etc. There was extremely little they would not touch, and absolutely no mercy. If you did not pay your taxes, you were considered a fraud, and very little effort was given to relieving any of that outstanding tax burden.

Then beginning in the 1980's, and through recent times, the IRS began taking a different tactic. The idea was that if the IRS helped the taxpayer meet his/her obligations the Service would (a) look a lot nicer, (b) get a lot more money, (c) encourage folks to tell the truth. From this nascent set of ideas, came the wonderful form 433.

IRS Form 433 (see http://www.irs.gov/pub/irs-pdf/f433a.pdf) gives the IRS all the information about your income and assets, as well as your debts and obligations. Finding directions for completing this form is almost impossible. In point of fact, there are several different versions of the 433 abounding. Two of the most common for individual taxpayers are:
1. 433A -- the full enchilada. This unabridged document contains every conceivable income/asset/debt/obligation category the IRS can imagine. It is detailed, cumbersome, and rather depressing.

2. 433F -- this is the summary form of the 433A. Much easier to complete -- only two pages. Completing the 433F first makes completing the 433A much easier. In our firm, we have clients complete the summary form and then we complete the 433A, asking additional clarifying questions as needed.


The 433B is for businesses and is rarely used.

Once completed, the 433 is submitted to the auditor handling the case. If there is no auditor assigned, the attorney on the case contacts the local field office and arranges for an appointment. The taxpayer does NOT need to be there for this meeting.

It is critically important that you provide all substantiating documentation for income and expenses.

Typically, substantiating documentation includes copies of W-2 forms, pay stubs, bank records, lease agreements, titles to vehicles and property, copies of loans and investments paperwork, and any other entry on the 433 income/expense summary page.

THERE IS NO EXCEPTION TO THIS. IF YOU DO NOT HAVE THE DOCUMENTATION -- EITHER GET IT, OR YOU WILL NOT BE PERMITTED TO CLAIM THE EXPENSE, ETC.

At the meeting with the auditor, your attorney will review all the numbers and provide all supporting documentation. The idea is to figure out how much you will be able to afford to pay -- negotiate on monthly payment amounts. Note -- the withholding amount you claim on your paycheck is important here. The IRS WILL review this number when working with you at this auditor meeting. If the number is whacky wrong (i.e. you are withholding 10 and you are actually single without any reason to have anything more than 1), it will hurt you badly. Do NOT go to this meeting with a bogus withholding number.

If your income does not support paying any past taxes, you will be entitled to be placed in "uncollectable" status. This means that while liens may be placed against your property, the IRS will not garnish your wages or take anything from you. Note -- this is a two edged sword. It does not relieve you of tax liability. It does not remove your previous tax debt. It merely means the IRS will not seek to collect from you. Interest will continue to accrue. For some folks, however, the 433 and the audit represent the best method for not losing over 60% of their income to tax garnishments

Two points to remember here: 1. This is complicated form that has to be completed properly -- an attorney is best for this, and 2. The taxpayer meeting with the IRS is never a good thing (handling the audit him/herself) -- the IRS auditor cannot make the same negotiated deals he/she could with your attorney. You need a representative for this purpose.

If you have questions or need help addressing a tax law question, please do not hesitate to contact us! We are experienced immigration, tax, and bankruptcy attorneys who can help with questions from any state in the US. S

Sean R. Hanover, Esq
HanoverLawPC.com
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4 comments:

Anonymous said...

A rep at the IRS told me to fill out a form 433 f. I did not file for two years and ignored letters. My income is being garnished at 50% and my bank accounts are on their way. Anyhow, I finally did the two years in questions, as I knew, I did not owe any taxes, was due a pretty good refund for each year. I know, dumb that I did not deal with this in a more timely manner. Anyhow, I am not sure why I am being aske to file applications for a payment plan, when the person on the phone reviewed the numbers with me and knows that I am due refunds, and also knows that a large amount of money was taken from my pay. This does not seem like the right approach. I am submitting the forms by overnight mail today. I am worried that my accounts are still going to be siezed and don't want that. I am considering closing out the accounts that have not been frozen to date. The IRS does not seem to have their eyes on my checking account as yet. At this point, they owe me tax refunds and a refund for the pay they have taken. I am at a point of having no money to pay my mortgage, or for my bills. Any suggestions of the most appropriate course of action. I also have a child to feed, child care, medicine, etc. I made an error by not handling this right, but really need to scramlbe to get out of this and worry that the IRS is giving me the wrong information.
(they are also telling me to fax many many pages of documents. I don't even have the cash for that and they just assume that I own a fax machine at my home. I am lucky to have a phone.)
Thanks.

Sean Hanover said...

The key to working the with IRS is "cooperation". Schedule a meeting with the local field office and bring in all your documents. The agent with whom you meet will be able to help. If you need more information, feel free to reach out to us at 703-402-2723 or visit www.hanoverlawpc.com and submit a contact email.

Nicole Mowen said...

Must VA Disability income be included on Form 433?

Sean Hanover said...

Although disability income must generally be included, VA disability income is NEVER a part of taxable income. From the IRS website:

Do not include disability benefits you receive from the VA in your gross income. In particular some of the payments which are considered disability benefits include:
Disability compensation and pension payments for disabilities paid either to Veterans or their families,
Grants for homes designed for wheelchair living,
Grants for motor vehicles for Veterans who lost their sight or the use of their limbs, or
Benefits under a dependent-care assistance program.

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