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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28979
Experience:  Taxes, Immigration, Labor Relations
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Hello, My client owes back taxes for both Individual (form

Customer Question

Hello,

My client owes back taxes for both Individual (form 1040's) and their Corporation (form 1065's) for the years 2003 through 2010. This Corporation (which we'll call "Old Corp") has since been dissolved. As of 2011, my client became 50% interest owner (and CFO) of another Corporation (which we'll call "New Corp"). I have finally filed all of their Individual and Business returns for years 2003 through 2010 and now am submitting the "Form 656 Offer in Compromise" application to the IRS which will kick start the collection process and help determine a the amount my client can actually pay for these back taxes owed. This application says, that in addition to filing the Form 433-A which used by the IRS to determine a taxpayers ability to pay (as an individual - wages, income, etc.), that we also need to file a Form 433-B which is used by the IRS to determine if a taxpayer currently has income/cash/assets thorugh a business that could be used to help pay off back taxes owed.

My question/s is this: The "New Corp" has little assets since it is a computer networking servicing company and of those it does have, they are owned mutually and equally by both owners; Do I need to fill out this Form 433-B? The other owner has nothing to do with my client's previous tax issue and rightousely so, is not interested in liquidating "New Corp"s assets (which are 1/2 owned by him) to satisfy by my clients previous tax debts on the "Old Corp". Is the Form 433-B even applicable (needed) in this sitation or is just the Form 433-A going to suffice for the IRS?
Submitted: 4 years ago.
Category: Tax
Expert:  Lev replied 4 years ago.

LEV : Hi and welcome to Just Answer!If you are filing form 1065 - that is not for a corporation - but for the partnership. Partnerships pass tax liability to partners who in turn will be liable for income taxes as individuals.The partnership is required to prepare the form 433B. The IRS will compare form 433B with whatever you report on 1065's - and in case of discrepancies - you will be asked for supporting documents of business income and expenses. If the old partnership was reorganized into a new entity - that should be noted.So - your question - Do I need to fill out this Form 433-B? - yes - form 433B is required because part of income (and tax obligations) came from the partnership.The Purpose of Form 433B is to evaluate if the business taxpayer will be able to pay the current tax debt and still be current with ongoing tax obligations.
Customer : My correction...I meant to say Form 1120's (not 1065's); I filed 1120s for the years 2003 through 2010. Does this change your response/answer?
LEV : Only if the business is a sole proprietorship (filing Schedule C) - we should not use 433B - for all other types - the form is needed - including S-corporations.Even if there is a Single member LLC which is a disregarded entity - the form 433B would be still required.
LEV : Time ago the IRS requires to use form 433B for all types of business including a sole proprietorship. Later - to simplify the process - self-employment persons do not need to use this form anymore - but all other business types do require that form. without form 433B - the OIC could be simply rejected.
Customer : One more question on this...The IRS will not be able to force my client to liquidate any of the "New Corp"'s assets or equity (which is minimal to begin with) since they are jointly owned by another officer that had nothing to do with my client's previous tax bill. That being said, the New Corp's asset and equity information on this form 433-B won't help them at all. So, why do they need this form filled out with this information?
Customer : Thanks.
LEV : The purpose why the IRS collects such information - not because they plan to levy on business assets. The IRS very rare do that.The Purpose of Form 433B is - to evaluate if the business taxpayer will be able to pay the current tax debt and still be current with ongoing tax obligations.