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How to Complete Form 433-B (OIC)
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♫ ♪ Opening music plays in the background ♪ ♫ How to complete Form 433-B (OIC)
In this video, we’re going to be going over Form 433-B OIC which is the collection information statement for businesses.
You’ll need to complete Form 433-B if your OIC is for a business entity, such as a corporation, partnership or LLC.
The form should be completed as accurately as possible.
Before you start completing this form, just know that if your business is currently in a bankruptcy proceeding, it’s not eligible to make an offer.
If your business has employees, you must be in compliance with your federal tax deposits for the two quarters prior to offer submission and the quarter of offer submission, or you are not eligible.
This might save you some time beforehand.
Basic business information We’re going to go through this form section by section starting with Section 1 This section is asking for business information.
And it is very basic.
Everything is self-explanatory for the most part.
But let’s go over a few of the not so obvious questions.
First off, we have the frequency of tax deposits question.
This just refers to deposits for payroll taxes if the business has employees.
The IRS requires that businesses use the Electronic Federal Tax Payment System E – F – T – P – S to make employment tax deposits.
You can go into your EFTPS account and view your payment history to find the frequency.
Or if you use a third-party payroll provider, they should have the information.
The percent of ownership and annual salary question is where you’ll be telling the IRS who the owners are and how much they’re paid.
Business Assets Information and How to Calculate Values Section 2 is business asset information.
To complete this section of the form, you’ll need to gather the business’s most current statements from banks, lenders on loans, mortgages, including second mortgages, monthly payments, loan balances and accountant's depreciation schedules, if applicable.
Also, include make/model/year/mileage of vehicles and current market value of business assets.
To estimate the current market value, you may consult online auto valuation resources.
Also, you can check local real estate postings of similar properties, and any other websites or publications that show what the business assets would be worth if you were to sell them.
The asset values are subject to adjustment by IRS.
If you need additional space, please include attachments.
And remember to round to the nearest dollar.
Don’t enter a negative number.
If any line item is a negative number, enter "0".
Another quick tip is that if you don’t have any assets in a certain category – let’s say you don’t have any real business property as you lease your space put N/A or None in the appropriate subsection.
You don’t want it to appear as you’ve skipped a question.
Information that you populate into this section allows the IRS to see what the business has for assets, cash investments or machinery, whatever has some type of value.
The key here is a quick sale value, not the highest price you can sell it for.
Used tools are not worth as much as new ones.
And, a vehicle that has mechanical problems or cosmetic issues is worth substantially less than one that is in good condition or prepped for retail sale.
Basically, you’re going to determine what the business assets are worth if you went out today to try and get money for them ASAP.
Be sure to disclose any ownership interest you have in any business.
Many times, taxpayers fail to do this, and the IRS finds out this information when investigating the offer.
Cash and Investment Now, let’s go through each part of the business asset info section.
First up is Cash and Investments.
The cash section goes over basic bank account information to see what cash is in your business bank accounts.
For the investments subsection most companies aren’t going to own stocks or bonds but fill out this section if the business does.
Also, to find the quick sale value, you’ll take the asset’s current market value and multiply that by .8 and then subtract the loan balance if there is one.
You’ll see this equation throughout the form just think of it as the calculation to determine the quick sale value of the asset.
Notes and Accounts Receivables Alright, now it’s notes and accounts receivables.
These are simple yes/no questions.
The difference between notes receivable and accounts receivable is that notes receivable are written promises from third parties agreeing to pay you money in the future, and accounts receivable are payments coming into the business from customers for regular purchases.
The answer for many businesses will be no.
However, if you do have notes receivable, you’ll need to attach a list of these to the offer.
You don’t have to attach a list of accounts receivable if you have them when you’re submitting the offer, but the IRS may ask for them later.
Real Estate Moving on, we come to real estate.
If the business owns real estate, you’ll determine the current market value of it and put it here.
As we pointed out earlier in the video, you can use online real estate websites to determine the current market value.
Also be sure to take into consideration the condition of the property to determine the current market value.
Business Vehicles Same logic with determining the current market value of business vehicles as with real estate.
You want to do a comparison on online auto valuation websites to determine the vehicles’ values.
You’ll want to use private party values and not trade-in values.
Some self-employed taxpayers making offers will list their vehicles used for the business and personal use on both Form 433-A and B OIC which is not correct.
So don’t make that mistake.
You should list vehicles that are owned by the business on Form 433-B and vehicles that are owned by you personally on Form 433-A (OIC).
Other Business Equipment The final subsection in the business assets section is other business equipment.
Here, you’ll list all the equipment or tools used in the business.
Say for example, the business is a bakery, you’d list all the pots and pans, mixers, ovens, display cases, etc.
And again, you’re going to go online or to publications that have similar items to assist you in determining their current market values.
Remember to take into consideration the condition of the business equipment.
You’re trying to determine the quick sale value here.
Equity of all Business Assets to Complete the Form Here at the end of Section 2, you’re going to add up all the values of your business assets you’ve just determined and put this amount in Box A This box is the amount of available equity in the business’s assets.
You’ll just simply add up the amounts from the lines in this section without a letter beside them.
Add lines: 1. Cash 2. Investments 3. Real estate 4. Business vehicles 5. Other business equipment And place the amount in Box A
Business Income Information Next up is Section 3, Business Income Information.
In this section you’re telling the IRS how much gross income the business generates on a monthly basis.
This is basically your profit and loss statement.
If you already have a recent 6 to 12-month P&L statement, you can put the monthly amount into Box B and skip lines 6 through 10.
If you don’t have a P&L statement, you’ll need to enter the average gross monthly income of the business.
To determine the gross monthly income, use the most recent 6 to 12 months documentation of commissions, invoices, gross receipts from sales/services, etc.
Most recent 6 to 12 months earnings statements, etc., from every other source of income, such as rental income, interest and dividends, or subsidies.
You should enter current income and expense information.
For example, if you file an OIC in September 2021 you should include 2021 income and expense information rather than Note, your entire income should also include income that is considered as not taxable and may not be included on a tax return.
only using 2020 information.
And, the IRS may ask for an update of this information later.
Business Expense Information Now let's go to Business Expense Information, Section 4.
This is where you determine the total average monthly expenses for your business in Box C.
This total will then be deducted from Box B Total Business Income to find the net monthly profit of your business.
Again, having a Profit and Loss Statement is advantageous for completing this section.
Enter figures as if they were monthly amounts just like section 3.
With the P&L Statement, you're going to go straight to box C with the total expenses from your statement figured to a monthly number.
You can skip lines 11 through 20.
Without a P&L Statement, you’re going to create the “loss” section here.
Enter the average gross monthly expenses for your business using your most recent 6 to 12 months statements, bills, receipts, or other documents showing monthly recurring expenses.
Put the total of these expenses into Box C.
Finally, you’ll subtract Box C (Total Business Expenses) from Box B (Total Business Income) and enter this amount in Box D to get your Remaining Monthly Income.
Calculation of Minimum Offer Amount Section 5 – this is where you’re going to calculate the minimum offer amount the IRS will accept to settle your business tax debts in full.
There are two types of offer calculations.
One is based on paying off the amount over a shorter amount of time 5 or fewer payments within five months.
The other is paying your offer in 6 to 24 months.
The amount of time you take to pay your offer in full will affect your minimum offer amount.
Paying over a shorter period of time will result in a smaller minimum offer amount.
So, going through the two different calculations: If you will pay your offer in 5 or fewer payments within 5 months or less, multiply Remaining Income (Box D) by 12 to get "Future Remaining Income (Box E)." Do not enter a number less than zero and remember to round to the nearest whole dollar.
For example, if your “remaining monthly income” in Box D is $500, your “future remaining income” in Box E would be $6000.
If you will pay your offer in 6 to 24 months, multiply "Remaining Monthly Income" (Box D) by 24 to get "Future Remaining Income (Box F)." Do not enter a number less than zero and remember to round to the nearest whole dollar.
For example, if your “remaining monthly income” in Box D is $500, your “future remaining income” in Box F would be $12,000.
Finally, you’ll take the amount from your Box A and add that to the amount from either Box E or F, depending on how you plan to pay off your offer to determine your offer amount.
Remember, your offer can’t be zero $0 and you can’t leave the Offer Amount blank.
Other Information Everyone should view this segment.
Section 6 is titled, Other Information.
This section asks questions about the legal history of the business.
The questions are self-explanatory.
Also, this is where the form tells you that if the business is in bankruptcy that you can’t file an offer.
Remember we mentioned this at the beginning of the video, so you wouldn’t get all the way to this section and realize that simple barrier.
One thing to note in this section is transfer of assets for less than full value in the past 10 years or for real estate in the past 3 years.
Many taxpayers sell their assets for amounts lower than what they’re worth to family members or others to keep them out of the offer calculations, or out of the IRS’s reach.
Depending upon the facts, the IRS may treat this as concealing assets, which may lead for individuals to fines of up to $100,000 and imprisonment of up to 3 years, under IRC 7206(5).
With its records and ability to research past business transactions the IRS finds out about these types of transactions.
The IRS may treat this as if you still have the value in the asset when vetting your offer amount.
Signatures, Dates and Final Checklist Last part section 7 – signatures.
It’s very easy here, the business owner should sign and put their title and date on the document.
Forgetting to sign your Form 433-B (OIC)
is a common mistake and will cause a significant delay in processing your offer.
The form also has a checklist at the end for help.
Make sure you include all applicable attachments and signatures.
Let’s briefly go through them: A current Profit and Loss statement covering at least the most recent 6 to 12 months period, if appropriate.
Copies of the six most recent bank statements for each business account and copies of the three most recent statements for each investment and retirement accounts.
If an asset is used as collateral on a loan, include copies of the most recent statement from lender(s) on loans, monthly payments, loan payoffs and balances.
Copies of the most recent statement of outstanding notes receivable.
Copies of the most recent statements from lenders on loans, mortgages (including second mortgages), monthly payments, loan payoffs and balances.
Copies of relevant supporting documentation of the special circumstances described in the “Explanation of Circumstances” on Form 656, if applicable.
Attach a Form 2848, Power of Attorney, if you would like your attorney, CPA, or enrolled agent to represent you and you do not have a current form on file with the IRS.
Make sure the current tax year is included.
Completed and current signed Form 656.
This ends the video – thanks for watching.
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