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Sharing Your Finances with the IRS

Usually, in cases of non-payment of taxes, the IRS asks taxpayers to share their financial information. Handing over complete financial information to the IRS gives them the power to better determine collection action. After review, they can place a lien on any property or asset, or determine the maximum amount a taxpayer can pay to satisfy the tax debt.

Payment of Tax Debt

The IRS usually asks for the sharing of financial information for larger tax debts, reduction of tax debt, and postponement of payment of tax debt. If a taxpayer owes a large amount (usually $50,000 or more), the IRS demands a financial statement to determine ability to pay. Depending upon how much in assets (including property, money in the bank, and wages) a taxpayer has, the IRS determines how much the individual can pay.

For reduction of a tax debt with plans such as the Offer in Compromise or Partial Payment Installment Agreement, the IRS uses a financial statement to determine paying ability. The IRS may also place a lien as security to ensure payment.

If a taxpayer is unable to pay any amount in tax debt, the IRS may assign the status of Currently Not Collectible (CNC). Again, to determine the current taxpayer’s ability to pay, the IRS utilizes a financial statement. Under CNC, the IRS routinely monitors the financial situation of the taxpayer for improvement.

Form 433-F, Collection Information Statement

The IRS collects the financial information of a taxpayer using Form 433-F, Collection Information Statement. On this form, a taxpayer is required to disclose every financial account, including:

  • Checking accounts
  • Online accounts
  • Mobile accounts (PayPal, etc.)
  • Savings accounts
  • Certificates of Deposit
  • Trusts
  • Individual Retirement Accounts (IRAs)
  • Keogh plans
  • Simplified employee pensions
  • 401(k) plans
  • Profit sharing plans
  • Mutual funds
  • Stocks and bonds
  • Business accounts

If a taxpayer owns any other investment and financial accounts except these, s/he is required to disclose them as well.

Along with financial accounts, the taxpayer is also required to disclose real estate such as a house, vacation property, timeshares, vacant land, etc. Any other asset must also be included. These include cars, boats, recreational vehicles, whole life policies, and business assets.

The taxpayer is also required to share their credit card type, credit limit, balance owed, and minimum monthly payment.

If he or she owns a business, the taxpayer must report accounts receivables owed to the taxpayer or the business. If working as an employee, the taxpayer needs to report his or her details of employment, including payment details, and name, and address of the current employer.

Any income, whether it’s alimony, child support, rental income, unemployment income, pension income, Social Security income, interest/dividend, and net self-employment income must also be reported on Form 433-F.

Lastly, the taxpayer needs to estimate and report his/her monthly necessary living expenses. The IRS cannot enforce payment of a tax debt if it pushes a taxpayer into a financial crisis where s/he is unable to meet basic living expenses.