Booklet 656 form 433b is expected for those business owners that have businesses that are any other entity than sole proprietorships. This form calculates the minimum offer you can make the IRS when seeking an offer in compromise, unless you are able to provide evidence otherwise.
How to complete form 433-b
Section 1 is where you’ll provide an employer identification number, partners, officers, LLC members, major shareholders, and frequency of tax deposits.
Section 2: In section 2, you are to provide business asset information, including: bank accounts, investment accounts, and notes receivable. Also, here you’ll provide information regarding vehicles, equipment, and real estate.
Section 3: This section requests your business income. The form requests your average gross monthly business income based on documentation from the most recent 6-12 months. However, if you also present a profit and loss report for this period, you can give an average amount of profit from these figures instead.
Section Four is where you will supply the details of your business expenses. That is, your average gross monthly expenses of the more recent period 6 — 12 months (all documented). And, if you will include a profit and loss statement for the period, you can give an average amount here.
In calculating an offer
If you intend to pay off the offer amount within a period of 5 months, follow the procedure below to calculate the amount.
[Business income in excess of expenses x 48] Total available assets
The formula below is for establishing the offer when you don’t plan to complete payment within a period of 5 months.
[Business income in excess of expenses x 60] Total assets available
choose, your minimum contribution amount must exceed zero.
Lastly, the 433-B requires some miscellaneous info this uses to consider in settling your tax debt. For example, this section queries whether your enterprise has claimed bankruptcy before. This question is useful because your company is ineligible to apply for an offer in compromise on its tax liability when in a bankruptcy proceeding. This partalso asks if the company has any variety of other affiliations, asks if any related parties owe finances to the company, and seeks to find out whether the business has been party to a litigation. Additionally, it seeks to find out if the business has unloaded any assets in the last Ten years at a discounted price.