Episode 38: In this episode, Timalyn is going to discuss a document that's often used in tax relief negotiations, IRS Form 433-F. In her previous episode, she addressed the tax relief journey to try to make it easier to understand. Today, she'll do the same with a form that plays a big role in your negotiations with the IRS.
NOTE: Timalyn points out that you need to make sure you're using IRS Form 433-F. There's a similar document, IRS Form 433-F (OIC), that's used when you're making an offer in compromise. However, the "OIC" version is not the form for today's discussion.
Timalyn is on a mission to fill the tax literacy gap, one taxpayer at a time. While she uses these forms all the time, she realizes that most taxpayers don't fully understand what they are or why Timalyn is asking for certain information that goes on them. She understands what information the IRS is going to request, so having the correct information can both speed up the process and help to move the negotiations forward.
It's a Collection Information Statement
The 433-F is more detailed than your IRS Form 1040. The form provides supporting information for an installment agreement, which allows you to pay your tax debt in installments, rather than in a lump sum.
If you are going to apply for an installment agreement on your own, and it's not a streamlined agreement (meaning you can't pay it back within 72-months or before the Collection Statute Expiration Date – CSED), you'll need to provide the IRS with additional information to support your situation.
Timalyn explains that if you owe more that $50,000, you will be required to submit specific financial information, using IRS Form 433-F.
If you are applying on your own and it is streamlined, you can use IRS Form 9465 to request an installment agreement. For more information, watch Timalyn's video. The IRS will charge you a $225 set-up fee. However, if you do it online or over the phone, the fee is only $31.
If you plan to apply for an installment agreement on your own, consider purchasing Timalyn's Guaranteed Installment Agreement e-book. It will walk you through the process and to get your plan set up quicker.
What is the purpose for the 433-F ?
This form collects your current financial information used to determine how you can satisfy your debt. This applies to an individual or a small business owner. The IRS wants you to prove why you're going to need more than 72-months to pay the debt. The form gathers that information.
You'll use this form to report your income over the last 3 months. Remember, it may have changed since you filed your tax returns.
Timalyn takes a minute to explain why you should probably seek a consultation with a tax professional who has specific experience in tax relief. That information will be extremely helpful, even if you decide not to ultimately hire him/her to represent you in this process.
While the IRS wants the last 3 months, you actually might want to provide the last 6, 9, or 12 months, because certain factors, such as a period of unemployment, may change the picture in your favor.
Timalyn explains the IRS is really trying to analyze your cash flow. Some jobs pay weekly, while other sources of income such as social security only pay monthly.
Over the past 12 years as an enrolled agent, Timalyn knows the IRS is also looking at what you owe other people or companies. Having other required payments will limit your cash flow, but it's not that easy.
The IRS will consider your credit card balance and your available credit. They may determine you could use some of the available credit to pay your tax debt.
Additionally, the IRS will review your assets. For instance, do you have equity in your vehicles? How much do you owe on the loans? How much are the monthly payments? What is the fair market value of the vehicle(s)? Realize the IRS may require you to sell some assets to pay your tax debt. Starting to get the picture?
Are You a Business Owner?
If so, the IRS wants to know about your accounts receivable balance. The IRS can consider you're A/R because it could increase your normal cash flow. You need to be open and honest in your negotiation with the IRS. If they think you're playing games, they will be much more difficult in striking any type of arrangement with you. In fact, they could simply decide to issue tax liens on specific tax years.
Do I Have to Provide All of This Information?
Timalyn's answer is, "it depends." The IRS has the right to specific information when you're involved in a negotiation with them. Remember, you owe them and are at their mercy. If you're trying to establish an installment arrangement, you're asking them for a favor (even though we may not look at it that way).
On the other hand, there are National Standards and Local Standards. If your expenses fall below these levels, you still get the benefit of the allowable standard. It's like taking advantage of the standard deduction on your tax returns. Be sure to listen to Episode 39 for more information in this scenario.
This is complicated, so you may decide to get a consultation with a tax professional. You can sign-up for a tax consultation with Timalyn. There is a fee, but you'll have a full hour for her to review your specific situation and give you a diagnosis. You can later decide to hire her or you can decide to hire another tax professional. Either way, you'll have solid advice and will be better prepared to take the next step.
Please consider sharing this episode with your friends and family. There are many people dealing with tax issues, and you may not know about it. This information might be helpful to someone who really needs it. After all, back taxes shouldn't ruin their life either.
As we conclude Episode 38, we encourage you to connect with Timalyn on social media. You'll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.
Remember, Timalyn Bowens is America's Favorite EA and she's here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today's episode.
For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .
If you have any feedback, or suggestions for an upcoming episode topic, please submit them here: https://www.americasfavoriteea.com/contact.
Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.
