Form 433: the document that decides almost every outcome

Which form, and why it matters

433-F is the short version, used in automated collection and for many straightforward cases. 433-A is the long version for individuals and the self-employed, used where a revenue officer is assigned. 433-B covers businesses. The offer in compromise versions of 433-A and 433-B add the schedules that compute collection potential.

Being asked for the long form rather than the short one usually means the case has been assigned to a person, which changes both the scrutiny and the timeline.

All of them ask the same underlying questions: what you own, what you owe against it, what comes in, and what goes out.

Allowable expenses are not your expenses

This is the concept that determines every outcome, and it is the one most often misunderstood.

The IRS does not accept your spending as the measure of what you need. It applies national standards for food, clothing, household supplies, personal care and miscellaneous items, and for out-of-pocket health care. It applies local standards, varying by county and family size, for housing and utilities and for transportation. Where your actual spending exceeds the standard, the excess is generally disallowed.

So a household paying well above the local housing standard will be treated as having more available each month than it does. The same is true of vehicle payments above the transportation allowance.

There is a route through this, and it has to be argued rather than assumed. An expense above the standard can be allowed where it is necessary for the health and welfare of the family or for the production of income — a medically necessary arrangement, a vehicle required for a specific kind of work, care costs that let you keep working. Each requires evidence.

The IRS also allows certain expenses outside the standards entirely, including court-ordered payments, current tax obligations, and some secured debt. Missing those is a common and expensive omission.

Assets and the equity question

The statement asks for every account, every vehicle, every property, every investment, life insurance with cash value, and business assets and receivables.

Equity is generally taken at a quick-sale valuation — below market — less what is owed against the asset. That treatment matters, and it is the difference between a home appearing to have substantial equity and appearing to have little.

Retirement accounts are included and are frequently decisive, particularly for an offer, where the value is considered net of tax and any early withdrawal cost.

Transfers made while the liability existed get particular attention. A property signed over to a relative, or a large distribution spent, will be examined as a dissipated asset and can be added back into the calculation as though you still held it.

How to fill it in so it works

Completely, consistently and with documents. An incomplete statement is returned, which costs a month; an inconsistent one — bank statements showing spending the form does not report — costs credibility on every other line.

Expect to supply three months of bank statements for every account, recent pay records, the mortgage or lease, utility bills, vehicle finance statements, and proof of any expense claimed above a standard. For a business, add the profit and loss, the balance sheet, and the accounts receivable ageing.

Two practical points. First, the form is signed under penalties of perjury and it asks about assets, transfers and income in terms that leave little room for approximation. Second, the version you submit becomes the baseline the IRS works from and returns to at every later review, so a statement assembled carelessly to meet a deadline tends to be regretted for a long time.

The work worth doing before submitting is deciding which resolution the numbers actually support, and making sure the statement is complete and defensible for that one — not shaping the numbers, which does not survive verification, but making sure every allowable expense that genuinely exists is on the form with a document behind it.

Where this comes from

The statutes behind this page, so you can check any of it rather than take it on trust.

IRC §7122(d)(2)

Requires the IRS to develop schedules of national and local allowances designed to provide for basic living expenses.

IRC §6159

Installment agreements, where the statement determines the monthly figure above the streamlined thresholds.

Treas. Reg. §301.6343-1(b)(4)

The economic hardship standard the statement is measured against for not-collectible status and levy release.