Form 433-A Section 6: Other Legal Information
Check the appropriate Yes and No boxes, and provide additional information concerning any pending legal actions to which you are a party. You will need to let the IRS know if there are any garnishments against your wages, any judgments against you, and whether you have ever filed for bankruptcy. The IRS also asks about money or assets you have transferred to other people for less than their actual value, and whether you expect your income situation to change in the next few years.Attachments required: if you answered yes to any of these questions, provide a detailed explanation on a separate sheet of paper. For example, you might want to detail any lawsuit or bankruptcy proceedings.
Form 433-A Section 7: Vehicles, Real Estate, Personal & Business Assets
Provide detailed information about cars, trucks, and real estate that you own.For vehicles, provide make, model, and model year information along with mileage, loan balance, lender, purchase date, and amount of your monthly payment. If you are leasing a car or truck, put that information on Line 19. Vehicles include all types of cars, trucks, vans, RVs, trailers, motorcycles, and boats.
Personal assets, such as furniture, artwork, and jewelry, are reported on Line 21.
Business assets, such as computers and tools, are listed on Line 22.
Provide information about your house and other real estate you own. Provide information about all mortgage and home equity lines of credit in the real estate section.
Attachments required: Current statements from lenders showing monthly payment and current loan balance.
For vehicles, it would be a very good idea to print out a report showing the fair market value of your car or truck. Make sure you explain what condition your car is in, and what the approximate market value of the car is. I use the Kelley Blue Book reports, and print out private-party values for the two closest vehicle conditions. For example, if I feel the car is in "good" condition, I will print out the good and excellent condition price reports. This will provide the IRS with an approximate range, as well as an explanation of why I think the car is in "good" condition.
For real estate, it would be a very good idea to provide either an appraisal of the actual property, or a report from a real estate agent showing sales of comparable homes. Usually the comparable sales report is sufficient for a rough draft of the Offer in Compromise, but the IRS sometimes requests a full appraisal. It is also a good idea to detail the condition of the house. If you recently tried to refinance your mortgage or obtain a home equity line of credit, having any rejection letters from lenders will be valuable to add to your Offer in Compromise documentation. This will show that lenders are unwilling to extend you additional credit at the present time.
Both car loans and mortgages relate to your Offer in Compromise in several important ways. First of all, the IRS generally does not want you to sell your car or home in order to pay off your tax debt. Generally, the IRS prefers that you keep your home and car and find other ways to pay your taxes, such as taking out a home equity line of credit. The IRS will therefore look at the fair market value of your house, compare it to your outstanding mortgage balance, and determine if there's additional equity you can tap into. Also, the IRS will discount the value of your house, cars, and other vehicles to their quick sale value. The quick sale value is calculated on Form 433-A Worksheet, and is equal to 80% of the property's current fair market value. Some taxpayers will find that they are "upside down" on their loans, that the loan balance exceeds the quick sale value of their car, truck or real estate.
Despite these general rules, I have seen the IRS ask the taxpayer to sell a second or third car, or to sell a house with substantial equity, before an Offer could be approved. These are matters for negotiation between the IRS and the taxpayer. Just be aware that the IRS is looking to collect as much money as possible given the taxpayer's unique financial situation.
Form 433-A Section 8: Accounts Receivable and Notes Receivable
For self-employed individuals, provide information about all your outstanding accounts receivable.
