Preparing the IRS Financial Statement: Do’s and Don’ts

If you can’t pay your tax debt in full, you will have to completely disclose your financial circumstances to the IRS.

There is no way to avoid this disclosure requirement other than making full payment.

A taxpayer’s financial information is provided on one or more of the following prescribed IRS forms:

IRS Form Number Description Who Must File
433A Collection Information Statement for Wage Earners and Self Employed Taxpayers Wage Earners and Self-Employed Taxpayers seeking Installment Payment Plans or Offers in Compromise
433B Collection Information Statement for Businesses Corporations, Partnerships, LLC’s and other non-individual legal entities seeking Installment Payment Plans
433F Collection Information Statement (Short Form) Individual Taxpayers (may be allowed in lieu of a 433A)

Here are 10 do’s and don’ts to keep in mind when the IRS requests one of the above financial statements:

  1. Do consult your accountant (preferably a CPA) before preparing the financial statement
  2. Do tell the truth
  3. Do use “quick sale value” in determining the values of your assets
  4. Do include all of your non-tax debts
  5. Do attach a statement of anticipated increases (if any) in your living or business expenses
  6. Do include all of your income from all sources
  7. Don’t hide assets
  8. Don’t assume the IRS will understand your financial situation (i.e. attach explanatory statements)
  9. Don’t sign over your assets to your spouse or other relatives (it won’t work and could trigger a tax evasion charge)
  10. Don’t sign the financial statement unless you are certain that it is accurate (potential penalties of perjury)

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