IRS Form 433-B (OIC) Guide: Business Offer Statement

1. Introduction – What is Form 433-B (OIC)?

IRS Form 433-B (OIC), officially titled Collection Information Statement for Businesses, is a specialized federal financial disclosure form governed by the Internal Revenue Service (IRS). It is an essential component of the business Offer in Compromise (OIC) application packet.

An Offer in Compromise is a formal agreement between a business entity and the IRS that settles an outstanding business tax liability for less than the full amount owed. Form 433-B (OIC) captures the business’s complete financial profile, including equity in commercial assets, bank accounts, accounts receivable, and monthly cash flow.

The IRS uses Form 433-B (OIC) to calculate a company’s Reasonable Collection Potential (RCP). This formula determines the precise minimum dollar amount a business must offer to settle its federal tax debts.

2. Purpose of the Form

The primary purpose of Form 433-B (OIC) is to establish whether a business entity qualifies for tax debt settlement under the legal ground of “Doubt as to Collectibility.” It provides the objective evidence needed to prove that a company cannot pay its full tax liability through cash flow or asset liquidation before the statutory collection window expires.

Form 433-B (OIC) solves the problem of evaluating complex commercial solvency. Because business accounting involves diverse assets like client invoices, inventory, equipment, and real estate, the form applies standardized IRS accounting formulas to calculate a non-negotiable Minimum Offer Amount.

Additionally, the form protects the federal government’s interest by ensuring that corporate officers pledge all available business asset equity and net operating cash flow toward their settlement proposal.

3. Who Needs to File This Form

Form 433-B (OIC) is required for formal business entities that owe unpaid federal business taxes—such as corporate income taxes or payroll taxes—and are applying for an Offer in Compromise.

You must complete Form 433-B (OIC) if your business fits any of the following structures:

• C Corporations and S Corporations: Corporate entities seeking to settle corporate income taxes, employment tax liabilities, or civil penalties.
• Partnerships: Multi-member partnerships owing back federal tax debts.
• Multi-Member LLCs: Limited liability companies classified as corporations or partnerships for federal tax purposes that have outstanding tax liabilities.

4. Who Is Exempt / Not Required to File

Not every business owner seeking tax debt relief needs to complete Form 433-B (OIC). The form is restricted to formal business entities applying for compromise settlements.

Your business is NOT required to file Form 433-B (OIC) in the following situations:

• Sole Proprietorships: Unincorporated sole proprietors and independent contractors file individual Form 433-A (OIC) instead, even if reporting business income.
• Single-Member Disregarded LLCs: Single-member LLCs treated as disregarded entities generally file Form 433-A (OIC) alongside the individual owner’s tax disclosures.
• Offers Based on Doubt as to Liability: Businesses filing an Offer in Compromise using Form 656-L (claiming the tax is not legally owed) do not submit financial statements.
• Standard Business Payment Plans: Companies setting up standard monthly Installment Agreements or requesting Currently Not Collectible status without submitting a settlement offer.
• Solvent Businesses: Companies whose equity in assets and operating cash flow exceed total tax liabilities cannot qualify for an Offer in Compromise.

5. When to File

Form 433-B (OIC) is an event-driven application document. It is submitted simultaneously with your formal tax settlement request as part of the complete Form 656-B (Offer in Compromise Booklet) packet.

Review these critical timing rules:

• Concurrent Filing: Submit Form 433-B (OIC) attached to Form 656 (Offer in Compromise) when submitting your initial settlement package.
• Current Financial Data: Ensure all financial statements, bank balances, and accounts receivable reports reflect your company’s current financial status (within 30 to 60 days of mailing).
• Maintaining Tax Compliance: Your business must stay current on all ongoing quarterly payroll tax deposits (Form 941) while the offer is under IRS review, or the application will be rejected immediately.

6. Where and How to File

Form 433-B (OIC) is filed by mail as part of the physical Form 656-B application package. Electronic standalone filing is not available for business Offer in Compromise packets.

Assemble your completed Form 433-B (OIC), Form 656, required application fee ($205), initial offer payment, and all supporting financial attachments into one package. Mail the complete packet to the dedicated IRS Offer in Compromise processing center address listed in the Form 656-B instructions based on your business state of operation.

7. Step-by-Step Instructions to Fill the Form

Form 433-B (OIC) guides you through a structured 6-step financial calculation tailored for business accounting. Review the summary table and detailed section breakdowns below.

Form Section	Section Title	Key Information to Disclose
Section 1	Business Information	Legal entity name, EIN, DBA, business type, physical address, website, and payroll processor.
Section 2	Business Contacts	Details of corporate officers, partners, managing members, ownership %, and compensation.
Section 3	Other Financial Details	Pending lawsuits, bankruptcy proceedings, asset transfers, merchant accounts, and credit lines.
Section 4	Business Asset Information	Calculate net equity in bank accounts, accounts receivable, real estate, equipment, and inventory.
Section 5	Monthly Income & Expenses	Average monthly gross business receipts minus necessary operational operating expenses.
Section 6	Calculate Minimum Offer Amount	Combine Net Asset Equity + Future Remaining Monthly Income over 12 or 24 months.

Section 1 & 2 – Business and Contact Identification

Provide the full legal corporate name, trade name (DBA), Employer Identification Number (EIN), business operating address, and third-party payroll processor information. In Section 2, identify all corporate officers, general partners, or managing members, including their Social Security Numbers, titles, ownership percentages, and annual compensation.

Section 3 & 4 – Financial Information and Business Asset Equity

In Section 3, disclose bankruptcy history, lines of credit, and payment processor details. In Section 4, compute the Quick Sale Value (QSV) of all corporate assets (80% of Fair Market Value) and subtract existing encumbrances to determine Net Equity:

• Bank & Merchant Accounts: List all business checking, savings, and credit card processing account balances.
• Accounts Receivable (A/R): Attach an itemized aging report showing client names, unpaid invoice amounts, and collection probability.
• Real Estate & Vehicles: Commercial buildings, land, and corporate vehicles, minus mortgage balances or auto loans.
• Equipment & Inventory: Machinery, office equipment, and market value of raw materials/finished inventory.

Section 5 – Monthly Business Income and Necessary Expenses

Section 5 calculates net monthly operational cash flow based on a 3 to 12-month accounting average. Report gross monthly revenue from sales and services, then subtract necessary operational expenses such as employee payroll, rent/lease costs, utilities, inventory supplies, and business insurance. Non-essential officer perks or dividend distributions are disallowed.

Section 6 – Calculation of the Minimum Offer Amount

Section 6 combines your asset equity and net monthly cash flow to calculate your non-negotiable Minimum Offer Amount based on your chosen payment structure:

• Lump Sum Cash Offer (Paid in 5 or fewer installments within 5 months): Minimum Offer = Net Equity in Business Assets + (Net Monthly Cash Flow × 12).
• Periodic Payment Offer (Paid in 6 to 24 monthly installments): Minimum Offer = Net Equity in Business Assets + (Net Monthly Cash Flow × 24).

8. Required Documents/Information Needed Before Filling

The IRS will immediately return business Offer in Compromise applications that lack complete financial verification proof. Gather these essential documents before mailing your packet:

• Business Bank Statements: Copies of complete bank statements for all business checking, savings, and merchant accounts for the last 3 consecutive months.
• Financial Statements: Profit and Loss (P&L) statements and Balance Sheets covering the last 6 to 12 months.
• Accounts Receivable (A/R) Aging Report: Itemized list of unpaid client invoices showing client names, amounts, and aging breakdowns (30/60/90+ days).
• Asset Valuations: Commercial property appraisals, equipment lease documents, mortgage payoff statements, and vehicle title details.
• Application Fees: Form 656 application fee check ($205) and initial offer payment check. Note that business offers do not qualify for low-income fee waivers.

9. Common Mistakes to Avoid

Filing a defective Form 433-B (OIC) results in returned applications, lost fees, and immediate collection actions. Avoid these common mistakes:

• Offering Less Than the Minimum Calculation: Proposing a settlement amount lower than the total calculated in Section 6. The IRS will automatically reject any offer below your Reasonable Collection Potential.
• Omitting Accounts Receivable Aging Reports: Failing to attach a complete, itemized Accounts Receivable report. The IRS relies on A/R reports to evaluate immediate asset value.
• Falling Behind on Payroll Tax Deposits: Missing current quarterly Form 941 tax deposits while your offer is under review. This voids the application automatically.
• Filing Form 433-B (OIC) for Sole Proprietorships: Using corporate Form 433-B (OIC) instead of individual Form 433-A (OIC) for unincorporated small business owners.
• Deducting Non-Allowable Officer Perks: Subtracting officer bonuses, shareholder dividends, or personal vehicle expenses from business monthly revenue.

10. Penalties for Non-Filing or Errors

Submitting improper or fraudulent financial statements on Form 433-B (OIC) carries severe commercial and legal risks.

Key consequences include:

• Offer Rejection and Fee Forfeiture: Invalid applications will be returned. Your $205 application fee and initial offer payment are non-refundable and will be applied directly to your back tax liability.
• Trust Fund Recovery Penalty (TFRP): For unpaid payroll taxes, the IRS can bypass the corporate entity and assess responsible officers personally under IRC Section 6672, making them personally liable for the unpaid trust fund tax.
• Forced Collection Enforcement: Once an offer is rejected, the IRS will resume levying business bank accounts, seizing client accounts receivable, and issuing federal tax liens.
• Criminal Perjury Prosecution: Falsifying financial records or concealing business assets on Form 433-B (OIC) is a federal felony under 18 U.S.C. 1001, punishable by fines and up to 5 years in prison.

11. Related Forms or Schedules

Form 433-B (OIC) is part of a specialized suite of IRS tax debt settlement and corporate collection forms:

• Form 656: Offer in Compromise (the primary legal application to settle tax debt).
• Form 656-B: Offer in Compromise Booklet (contains instructions and forms).
• Form 433-A (OIC): Collection Information Statement for Wage Earners and Self-Employed Individuals submitting an Offer in Compromise.
• Form 433-B: Standard Collection Information Statement for Businesses (used for standard payment plans).
• Form 941: Employer’s QUARTERLY Federal Tax Return.

12. Frequently Asked Questions

1. What is IRS Form 433-B (OIC)?

IRS Form 433-B (OIC) is the official financial statement used by corporations, partnerships, and multi-member LLCs applying for an Offer in Compromise to calculate their minimum business tax debt settlement offer amount.

2. How does Form 433-B (OIC) differ from standard Form 433-B?

Standard Form 433-B is used for general business collection cases such as payment plans or hardship status. Form 433-B (OIC) is used exclusively for business Offer in Compromise applications and includes specific worksheets to compute the minimum offer dollar amount.

3. Can a business qualify for the Low-Income Certification fee waiver?

No. The Low-Income Certification fee waiver applies exclusively to individual taxpayers filing Form 433-A (OIC). Business entities filing Form 433-B (OIC) must pay the $205 application fee and required initial offer payment.

4. What happens to unpaid payroll taxes during a business Offer in Compromise?

Payroll taxes (trust fund taxes) can be included in a business Offer in Compromise, but the IRS scrutinizes these offers heavily. The business must remain 100% current on all ongoing payroll tax deposits during the entire review process.

5. Can a sole proprietorship file Form 433-B (OIC)?

No. Sole proprietorships and single-member LLCs treated as disregarded entities file individual Form 433-A (OIC) instead, combining personal and self-employed business disclosures.

6. How long does the IRS take to process Form 433-B (OIC)?

The IRS generally takes 6 to 12 months to evaluate a business Offer in Compromise application. By law, if the IRS does not render a decision within 24 months of receipt, the offer is deemed automatically accepted.

13. Conclusion

IRS Form 433-B (OIC) is the critical financial foundation for settling corporate tax liabilities and payroll tax debts through an Offer in Compromise. It translates your business assets, accounts receivable, and net operating cash flow into a standardized mathematical settlement formula.

To maximize your chances of success, calculate your minimum offer accurately in Section 6, attach complete 3-month bank statements and Accounts Receivable reports, maintain current payroll tax deposits, and sign the document truthfully.