Form 433b of Booklet 656: Offer of Compromise

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Form 433-B from booklet 656 is necessary for those business owners that have businesses that are any other entity than sole proprietorships. This form is used in calculating the minimum offer you can make the IRS when pursuing an offer in compromise, unless you’re able to provide evidence otherwise.

How to complete form 433b of the 656

Section 1 is where you’ll provide an employer identification number, partners, officers, LLC members, major shareholders, and frequency of tax deposits.

Section 2: Next, the form asks for business asset information. This would include the company’s bank accounts, investment accounts, and notes receivable. Then the form requests facts about the business’s real estate, vehicles, and equipment. However, in reporting their value, the irs allows you to exclude your equity in any income producing assets.

Section 3: This section requests your business income. The form requests your average gross monthly business income based on documentation from the most recent 6-12 months. However, if you also present a profit and loss report for this period, you can give an average amount of profit from these figures instead.

Section 4: This portion of the 433b aims to find out your business expenses. This form seeks average gross monthly business expenses found in documents from the recent six — twelve months. Yet, again, if you are able to supply a profit and loss report for the period, you can then give an average amount of the expenses established by these data instead.

When calculating an offer

There are two means of determining the offer amount, this is dependent on whether you intend to satisfy payment of the offer within a period of 5 months or extending passed a 5-month period. If you’ll pay the offer off within 5 months, the formula for repayment is as appears below.

[Business income in excess of expenses x 48] Total available assets

The formula below is for establishing the offer when you do not intend to satisfy payment within a period of 5 months.

[Business income in excess of expenses x 60] Total assets available

As a minimum contribution amount you must exceed zero, regardless.

The sixth section

Finally, Form 433-B requires certain miscellaneous details this uses to consider the settling of your IRS tax debt. As an example, this section asks whether your company has claimed bankruptcy. This inquiry is important because your company is ineligible to apply for an offer in compromise on its tax liability when in a bankruptcy proceeding. This sectionalso asks if this enterprise has other affiliations, seeks to find out if any related parties owe money to the company, and asks whether your business has been party to a litigation. Additionally, it asks whether the company has unloaded any assets within the last Ten years at a discounted price.

 

Redmond CPAAbout Redmond CPA
Redmond CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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  • Huddleston Tax Accountants / Huddleston Tax CPAs – Redmond, WA
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    Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching,
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    We serve Tukwila, Auburn, Federal Way. We have a few meeting locations. If you are looking for a Redmond CPA firm, get in touch with us! Call to meet John C. Huddleston, J.D., LL.M., CPA, Lance Hulbert, CPA, Grace Lee-Choi, CPA, Jennifer Zhou, CPA, or Jessica Chisholm, CPA. Member WSCPA.