When your business owes back taxes and can't pay the full amount, the IRS offers a potential solution called an Offer in Compromise (OIC). Form 433-B (OIC)—the Collection Information Statement for Businesses—is a critical piece of this process. Think of it as a detailed financial snapshot of your business that helps the IRS determine whether to accept your offer to settle your tax debt for less than you owe. This guide breaks down everything you need to know about this form in plain English.

What Form 433-B (OIC) Is For

Form 433-B (OIC) is the financial disclosure form that businesses must complete when applying for an Offer in Compromise. IRS.gov

This form is specifically required if your business is organized as:

• A corporation
• A partnership
• A limited liability company (LLC) classified as a corporation or partnership

If you operate as a sole proprietorship, you'll use Form 433-A (OIC) instead, not this one.

The form serves a dual purpose. First, it collects comprehensive information about your business's financial situation—everything from bank accounts and equipment to monthly income and expenses. Second, it includes a built-in calculator that helps determine your minimum acceptable offer amount based on your business's ability to pay. The IRS uses this information to evaluate whether your proposed settlement represents the most they can reasonably expect to collect from your business.

The current version (revised April 2025) must be submitted alongside Form 656 (the actual Offer in Compromise application) and a $205 application fee, unless you qualify for a low-income waiver. Form 433-B (OIC)

When You’d Use Form 433-B (OIC)

Original Filing Only, Not for Late or Amended Returns

You use Form 433-B (OIC) when you're making your initial Offer in Compromise application—it's not something you file late or amend after the fact. This form becomes necessary in several specific situations:

Timing matters significantly. You must submit Form 433-B (OIC) when you've decided you cannot pay your business tax debt in full and are ready to propose a settlement. However, you can only apply after meeting strict eligibility requirements: all required tax returns must be filed, you must have received at least one bill for the tax debt, all current-year estimated tax payments must be made, and if you have employees, you must be current on federal tax deposits for the current and two preceding quarters. Form 656-B Booklet

You cannot file this form if your business is currently in bankruptcy proceedings, has unresolved audit issues, or if the IRS has already referred your case to the Department of Justice for litigation.

Special circumstances requiring this form include businesses facing genuine economic hardship that prevents full payment, situations where paying the full debt would leave your business unable to meet basic operational expenses, or when collection of the full amount is doubtful due to limited assets and future earning potential.

Key Rules You Need to Know

Several important rules govern Form 433-B (OIC) that can make or break your offer:

The Six-Month Documentation Rule

All financial information must reflect your business's situation using the most recent 6-12 months of bank statements, profit and loss statements, invoices, and expense documentation. The IRS requires current information because they're assessing your present ability to pay, not your historical financial position.

Asset Valuation Requirements

You must report the current market value of all business assets—including those located overseas—and the IRS applies specific formulas. Real property and vehicles are multiplied by 0.8 (representing 80% of market value) before subtracting any loan balances. Equipment and machinery used to produce income may be valued at zero if they're essential to business operations. You'll need to research fair market values using resources available online for vehicles or recent comparable sales for real estate.

The Trust Fund Tax Rule

If your business owes employment taxes (money withheld from employees' paychecks), the responsible individuals can be held personally liable for the trust fund portion even if the business offer is accepted. The IRS typically requires trust fund recovery penalty determinations on all potentially responsible individuals before accepting a business offer, unless you're a victim of payroll service provider fraud. Form 656-B Booklet

Disallowed Expenses

The IRS will not accept certain business expenses when calculating your ability to pay, including depreciation, depletion, entertainment expenses, or payments on unsecured debts like credit cards. Only actual cash expenses necessary to keep the business operating are considered.

Complete Disclosure Mandate

You must report ALL assets and income, including digital assets like cryptocurrency, overseas accounts, notes receivable, accounts receivable, and any related-party transactions. Failure to disclose or providing false information can result in rejection and potential civil or criminal penalties. Form 433-B (OIC)

Step-by-Step (High Level)

Step 1: Gather Your Financial Documents

Before touching the form, collect six months of business bank statements, current loan statements showing balances and payments, your most recent profit and loss statement, accounts receivable aging reports, vehicle titles and valuation information, commercial property appraisals or tax assessments, and documentation of any digital assets or cryptocurrency holdings.

Step 2: Complete Section 1 (Business Information)

Enter basic identifying information including your Employer Identification Number, business address, ownership structure, and details about all partners, officers, or LLC members with their ownership percentages. This section also captures whether you outsource payroll and your federal tax deposit schedule.

Step 3: Document Assets in Section 2

This is the most detailed section. List all business cash accounts, investments, and digital assets. Document any notes and accounts receivable. For real property, provide current market value, multiply by 0.8, and subtract loan balances. Do the same for vehicles and equipment. The form has specific line items with built-in calculations that automatically flow to Box A (Available Equity in Assets).

Step 4: Report Income in Section 3

Enter your average gross monthly business income from all sources—receipts, rental income, interest, dividends, and other income. You can use your most recent 6-12 month profit and loss statement or calculate averages from invoices and receipts. The total flows to Box B (Total Business Income).

Step 5: Detail Expenses in Section 4

List your average monthly operating expenses including materials, inventory, wages, rent, utilities, vehicle costs, insurance, and current taxes. Remember: no depreciation or credit card payments. The total goes in Box C, which is then subtracted from Box B to determine Box D (Remaining Monthly Income). Form 433-B (OIC)

Step 6: Calculate Your Minimum Offer in Section 5

Choose your payment timeline. If paying within 5 months or less, multiply Box D by 12. If paying over 6-24 months, multiply by 24. Add this “future remaining income” to Box A (available equity) to determine your minimum offer amount. Your actual offer must equal or exceed this calculated minimum.

Step 7: Complete Section 6 and Attach Documentation

Answer all questions about bankruptcy history, business affiliations, related-party transactions, litigation, asset transfers, and foreign holdings. Sign and date under penalty of perjury. Attach all required documentation listed at the end of the form, including bank statements, profit and loss statements, loan documents, and accounts receivable listings.

Common Mistakes and How to Avoid Them

Mistake #1: Filing Before Meeting Eligibility Requirements

Many businesses rush to file an OIC before ensuring all tax returns are filed and current payment obligations are met. The IRS will return your application and apply your payment to your tax debt without considering your offer. Prevention: Use the IRS Offer in Compromise Pre-Qualifier tool first, confirm all returns are filed, and ensure you're current on all deposits and estimated payments before submitting. IRS OIC FAQs

Mistake #2: Inaccurate or Incomplete Asset Valuation

Business owners often undervalue assets (hoping for a lower offer) or fail to report all assets, especially digital currencies, offshore accounts, or accounts receivable. The IRS will discover these through their investigation, and your offer will be rejected or you'll face fraud penalties. Prevention: Research actual market values using objective sources, report everything honestly, and include all attachments. When in doubt, overestimate rather than underestimate asset values.

Mistake #3: Claiming Disallowed Expenses

Including depreciation, amortization, personal expenses, or excessive owner compensation in your expense calculations inflates your claimed expenses and results in an offer amount that's too low. Prevention: Review the IRS Collection Financial Standards, stick to actual cash expenses necessary for operations, and exclude any non-cash items from your calculations.

Mistake #4: Missing the 6-12 Month Documentation Window

Providing outdated financial statements or mixing different time periods creates confusion and delays. Prevention: Use statements from the same recent 6-12 month period for all calculations, and clearly label the dates covered on your profit and loss statement.

Mistake #5: Failing to Continue Payments During Investigation

If you choose the periodic payment option but stop making monthly payments while the IRS reviews your offer, they'll return it without appeal rights and keep all money paid. Prevention: Budget for continued monthly payments for the entire investigation period (which can take up to 24 months), or choose the lump sum option if you can't sustain ongoing payments. IRS OIC FAQs

Mistake #6: Not Disclosing Related Party Relationships

Failing to report loans between the business and owners, family member employment arrangements, or affiliated company relationships raises red flags. Prevention: Complete Section 6 thoroughly, disclose all related-party transactions, and explain any arrangements that might appear questionable.

What Happens After You File

Initial Processing (4-8 Weeks)

After mailing your complete application package to the address specified in Form 656-B, the IRS conducts an initial review to ensure your offer can be processed. If you're missing required forms, documentation, payments, or haven't met eligibility requirements, they'll return your entire package with an explanation letter. The $205 application fee returns to you, but your initial payment stays and gets applied to your tax debt. IRS OIC Page

Assignment and Investigation (6-24 Months)

If your offer passes initial processing, you'll receive a letter with an estimated contact date. Your case is assigned to an Offer Examiner (centralized office) or Offer Specialist (field office). This person will contact you by phone or mail requesting additional verification documents—updated bank statements, proof of expenses, appraisals, or clarification on specific items. Respond promptly within the specified timeframe or risk having your offer returned without appeal rights.

During Investigation

Several important things occur: Your installment agreement payments (if you have one) are suspended but later reinstated if the offer is rejected. Interest and penalties continue accruing on your tax debt. The IRS may file a Notice of Federal Tax Lien, though they typically wait until a final decision. Collection actions like levies generally pause, but levies served before your offer submission may remain in place. You must stay current with all new tax filing and payment obligations or your offer will be returned.

The Decision

The IRS accepts your offer if it represents the most they can realistically collect within a reasonable time. They may propose a higher amount based on their investigation findings—you can then increase your offer or request a discussion with the offer manager. If your offer is rejected, you receive a detailed rejection letter with appeal instructions.

If Accepted

You must pay the remaining balance according to your payment terms (5 months for lump sum, up to 24 months for periodic). You must file and pay all taxes on time for five years after acceptance. The IRS keeps any refunds for tax years up through the acceptance date. Federal tax liens remain until you complete all payments. Defaulting on any terms—missing a payment, not filing a return on time, incurring new tax debt—reinstates your entire original debt minus payments made. IRS OIC FAQs

If Rejected

You have 30 days from the rejection letter date to appeal using Form 13711. The IRS Independent Office of Appeals reviews your case. If you don't appeal or your appeal is denied, you owe the full original amount plus all accrued interest and penalties, minus any payments already made.

FAQs

Q1: Can I use Form 433-B (OIC) if I'm a sole proprietor?

No. Sole proprietors should use Form 433-A (OIC) instead. Form 433-B (OIC) is only for corporations, partnerships, and LLCs not taxed as sole proprietorships. If you're unsure of your business structure, check your tax returns—if you file Schedule C with your personal Form 1040, you're a sole proprietor. Form 433-B (OIC)

Q2: What if I own both a business and have personal tax debt—do I need two forms?

Yes. You'll need two complete application packages: one Form 656 with Form 433-B (OIC) for business debt, and a separate Form 656 with Form 433-A (OIC) for personal debt. Each requires its own $205 application fee and initial payment, unless you qualify for the low-income certification (individuals only). Form 656-B Booklet

Q3: How does the IRS verify the information I provide on Form 433-B (OIC)?

The IRS conducts a thorough investigation including reviewing your submitted bank statements, profit and loss statements, and loan documents. They may request additional verification like appraisals, invoices, contracts, or signed authorizations to contact third parties. They also access IRS databases showing filed returns, reported income, prior tax transcripts, and third-party information returns. Discrepancies trigger requests for explanation or documentation.

Q4: Can I exclude business equipment from my asset calculation?

Yes, but only equipment essential for producing income. For example, a towing company can exclude the tow truck, or a contractor can exclude specialized tools and vehicles used on job sites. The IRS evaluates each case individually. Equipment must be necessary for business operations—you can't exclude general office furniture or decorative items. Document why specific equipment is essential for income production. Form 433-B (OIC)

Q5: What happens if my business's financial situation changes after I submit Form 433-B (OIC)?

You must notify the IRS immediately of significant changes. Major improvements in your financial situation (large contract signed, windfall received, major asset acquired) must be disclosed and may result in the IRS requesting an increased offer amount. Significant deterioration (lost major client, unexpected expenses) should also be reported with documentation, as it might support your current offer amount. Failure to disclose improvements can result in rejection or fraud penalties.

Q6: How long does the entire Offer in Compromise process take from filing Form 433-B (OIC) to final decision?

Plan for 6-24 months depending on case complexity and current IRS inventory levels. Simple cases with complete documentation and no complications may resolve in 6-9 months. Complex cases involving multiple businesses, disputed valuations, foreign assets, or incomplete information can take 18-24 months. The IRS must make a decision within two years of receipt or your offer is automatically accepted by default. IRS OIC FAQs

Q7: Can I negotiate with the IRS if they reject my calculated offer amount?

Yes. If the IRS determines your offer is too low based on their investigation, they'll notify you and give you an opportunity to increase your offer amount. You can also request a telephonic conference with the offer manager to discuss areas of disagreement. For certain disputes, Fast Track Mediation may be available for expedited review. If these options don't resolve the issue and your offer is formally rejected, you can appeal within 30 days. IRS OIC FAQs

Final Thoughts

Form 433-B (OIC) is a powerful tool for businesses genuinely unable to pay their full tax debt, but it demands absolute honesty, thorough documentation, and strict compliance with all requirements. Before embarking on this process, consider consulting with a qualified tax professional who can help you accurately complete the form, maximize your chances of acceptance, and navigate the complex IRS investigation process. The IRS provides extensive resources at IRS.gov and the Offer in Compromise Pre-Qualifier tool to help you determine if this option is right for your business.