Today, the United States has different rules and laws regarding the processing of tax documents. Recently, business owners are increasingly facing difficulties. It usually applies to tax payments and installments. During the pandemic, many organizations went bankrupt, and some had their financial situation deteriorated. That is why the authorities have introduced compromise proposals for the owners to somehow help with tax debts.
A compromise offer is a formal agreement between a taxpayer and the Internal Revenue Service that controls tax debts. It is the official way of paying off the tax debt. Why is this agreement called a compromise? It creates a tradeoff between the two parties that provides the interests of both (the tax collector and the tax service). The mandatory conditions are your real solvency. It will allow you to establish a trusting contact and approval from the tax structures. However, remember, applying does not guarantee one hundred percent approval. For some reason, it may be rejected.
Provide all necessary information regarding your financial condition, including assets, income, expenses, and loans. In any case, the tax service and the bank will conduct an audit, and everything secret will become clear. Before considering this offer, you must file all tax returns and make estimated payments for the current years. Otherwise, your application for a compromise offer will not be accepted.
In general, any entrepreneur can submit this application if there are financial difficulties and the business is threatened with collapse:
The compromise proposal allows you to settle questions about the tax debt for an amount that is less than the amount of the debt itself. However, if your company has already gone bankrupt and you are bankrupt, you cannot apply for this application. Any settlement of outstanding debts usually occurs as part of a bankruptcy proceeding.
Within the framework of such a proposal, several nuances need to be taken into account. For example, the Tax Service does not accept the full amount to pay the tax debt. It is not according to the rules, and, therefore, you may pay the debt in full in the future. Secondly, you can get any allowances in the number of thousands of $ 1,000 and $ 3,500 if you are an individual who is unable to repay the debt. Otherwise, you won’t get the receipt of such amounts.
A deposit is valid within the framework of such an offer. It is a legal requirement for all your property in the event of non-payment of the debt. If you do not pay the first bill by your duties, you risk losing your property. Usually, such points are officially spelled out in the agreements, and the taxpayer receives a notification about it. No one may force you to sign a compromise offer with a pledge if you disagree. It is a voluntary procedure. However, if you sign the document, you are required to comply with the requirements. If you have not paid the amount of your offer, the Tax Service has the right to collect money from your income. In any case, non-payment of debts leads to a fine and even the seizure of property.
So, to request a compromise proposal from the IRS, you must submit this form. To simplify the application process and save time, use the help of a highly qualified specialist. This way, you will avoid mistakes and miscalculations. In general, filling out this application involves paying a non-refundable fee (an additional amount for service). The entry fee is $ 205. There is an exception for low-income individuals. You may choose not to send money with the application. Next, you pay the first installment, which may be different. You get the following option:
After your application is approved, you are already officially paying the amount of the compromise offer. By the way, do not forget about your rights. Although you take responsibility for paying off your debts, you also have rights. You can’t be tried or arrested for no reason or forced to sign unfamiliar documents.
So, the form for a compromise proposal should consist of the following documents:
Without these documents, the Tax Service will not accept your application. Without these documents, the Tax Service will not accept your application. If you own a business together with your spouse or have the same tax debt, you must submit separate forms for a compromise proposal. It is a mandatory requirement of the authorities since everyone is responsible for the debts. If your spouse refuses to pay, notify the appropriate government authorities.
We remind you that before filling out the form, be sure to collect all the information about your solvency, tax debts, interest, and penalties. It will allow you to focus on the main thing and fill out the document correctly. Sign and send to the appropriate address. As a rule, the decision is already made by the Tax Service, and if it approves the application, you will receive a notification.
1. Basic Information
The first section of the form asks for data about you. Enter your first and last name, residential address, and current contacts. Also, write your social security number, contact email address. Put a checkmark in the appropriate place in the status column. Do not forget to enter the employee identification number. It is the official code of your organization.
Below is also a table about other relatives and close associates. You may not complete these lines. But if something happens, these contacts will allow you to solve problems or contact you.
You must complete the following section if you are an employee. In this context, the presence of business income is the reason for filling in these lines. This information is not only about you but also about your spouse. Follow the step-by-step instructions and specify all the business information. By the way, you may use our form-building software.
2. Assets And Finance
This official agreement and the form itself include data on current finances, debts, and expenses. Use the most recent bank statements (checks, savings accounts, money transfers) to fill out these items. You can also write about the availability of bonds, certificates, and shares. After filling in the form, check the information you entered several times to avoid mathematical errors.
The same goes for business information. You also fill in the necessary items but already take into account your income. If you are submitting a report on current expenses and profits, enter your total gross monthly income.
The IRS requests the full amount of information about any profit. Do not hide it, and do not neglect your opportunity to get approval.
3. Additional Form
Thus, you will gradually fill out the 433-A form if you are an individual or an individual entrepreneur with a low income. On the other hand, you may fill out the form 433-B. This document is for business owners, corporations, and large companies. You do not need to fill out two applications, as you only need to select one. In general, this application is identical to the first one. The only difference is in the conditions.
Check all the information about your business, including the identification number. Unfortunately, false data is the main reason for rejecting the application. It is in your best interest to provide a systematic overview of bank accounts, statements, and repaid taxes. After filling out this document, go to form 656-B itself.
4. Tax Periods And Explanation
As noted earlier, any official tax document contains information about tax periods. Select the type of tax, tax periods, and returns provided in the application. If you suddenly do not have enough space to fill in, attach additional sheets with a description. A prerequisite for filling in the form is an explanation of the request for a compromise proposal. If you specify exceptional circumstances, attach a statement.
5. Low Income
The section on low incomes is filled in only by individuals. You initially assess the situation of your family, monthly incomes, and expenses. It will accurately determine whether you are eligible for a low-income certificate. If you are approved of such a document, you may not pay the service fee.
As for the payment terms, the methods are listed above. If you have any difficulties, use our form-building software.
6. Initial Payment And Source Of Fund
This section of the form is optional. You may include a payment applied to a specific tax debt for a year. Note that it is not possible to pay off the debt in full immediately. In the section on financing, you should describe the source of the funds to pay your tax debt. Don’t forget to sign the document and put down the dates. After that, send all the forms to the Tax Service at the address.
7. Term Of This Agreement
It is no secret that the submission of official documents to the authorities is a lengthy procedure. You must not only find time to fill out the form but also carefully read the terms of the offer. At the very end of this form, the relevant requirements and your responsibilities are presented. Do not neglect this, as you are responsible for the signed document. Not knowing the fundament of the agreement does not relieve you of your responsibilities. There have been many cases when business owners unknowingly found themselves in terrible situations. Late payments lead to fines and even the seizure of property. We believe that no one needs such an outcome. Therefore, we strongly recommend that you read the terms of the agreement.
8. Paid Preparer
Not every taxpayer needs to fill in these columns. If you use the paid preparer help, this person fills out the section and signs it themselves. The authorized person shall indicate the full name, residential address, and telephone number. You must also specify a code for identification. If you do not use such help, leave the section empty.
What else do you need to remember? Submit the form on time, without delay. Unfortunately, the Tax Service has its schedule for accepting documents, and if you do not have time, your application will not be considered. Take into account the above data to quickly fill out all the legal papers and continue your business with a clear conscience. Your task is to pay off all your debts as quickly as possible and increase your profit.