IRS Form 433-A (OIC): Assets, Income, and Minimum Offer

IRS Form 433-A (OIC) is the financial disclosure that wage earners, self-employed individuals, and sole proprietors submit with an Offer in Compromise. It lists your assets, income, and expenses, and the IRS uses those figures to calculate the lowest settlement it will accept for your tax debt. Getting the numbers right matters more than anything else in the process, because the IRS plugs them directly into a formula. A mistake can send your entire package back unopened.

Who Uses Form 433-A (OIC)

The form is built for two groups: individuals who receive a W-2 and individuals with self-employment income reported on Schedule C or a similar schedule.¹ If both describe you, file one Form 433-A (OIC) and complete both the wage and self-employment sections.

Sole proprietors report business financials on this same form alongside their personal information. Corporations, partnerships, and LLCs classified as anything other than a sole proprietorship use Form 433-B (OIC) instead.² Form 433-A (OIC) is submitted together with Form 656, which is where you state your offer amount and payment terms.³

What You Must Have in Order Before You File

The IRS will not review your offer until you are current on all federal tax obligations. Every required return must be filed, including your most recent year. If you owe estimated tax for the current year, those payments must be made. Employers must be up to date on federal tax deposits for the current quarter and the two preceding quarters.² You must also have received a bill for at least one of the tax debts you want to compromise.⁴

If any prerequisite is missing, the whole OIC package comes back to you unprocessed. Filing an extension on your most recent return does not excuse you from filing the return itself before submitting the offer.

How the IRS Turns Your Numbers Into a Minimum Offer

The IRS calculates a Reasonable Collection Potential, or RCP, for every offer. Your proposed amount on Form 656 must equal or exceed the RCP.² The RCP has two components: net realizable equity in your assets plus a future income figure.

Net Realizable Equity

The IRS does not use full market value. It applies a quick-sale value, which reflects what an asset would fetch in a roughly 90-day sale. The standard is 80% of fair market value, though the IRS may adjust that up or down based on the asset and market conditions.⁵ Any balance owed to a secured lienholder is subtracted from that value. What remains is your net realizable equity in the asset.

Future Income

Take your monthly income, subtract expenses the IRS considers allowable, and you have monthly disposable income. That figure is multiplied by 12 for a lump-sum offer (paid within five months of acceptance) or by 24 for a periodic payment offer (paid in monthly installments over 6 to 24 months).²

Most offers succeed or fail on the expense side. A small difference in what the IRS allows in a single monthly category can move your minimum offer by thousands once the multiplier is applied.

Completing the Financial Sections

Form 433-A (OIC) covers four categories: assets, liabilities, income, and expenses. The point is to produce two numbers the IRS can plug into the RCP formula: total equity and monthly disposable income.

Assets and Liabilities

List every asset with its current fair market value and any loan balance against it. This includes real property, vehicles, bank accounts, investment accounts, retirement funds such as 401(k)s and IRAs, and valuable personal property like jewelry or collectibles. Real estate and vehicles get the 80% quick-sale valuation.⁵ Bank and investment balances count at face value because they are already liquid.

Watch out for dissipated assets. The IRS looks back roughly three years for property you sold, gave away, or transferred for less than fair value after your tax debt was assessed, or within six months before or after assessment. If the IRS decides you moved assets to avoid paying, it can add their value back into the RCP as though you still owned them.⁵ Gifting property to a family member after a tax lien attaches is treated even more harshly: the asset counts at full value. Do not move assets around in the run-up to an OIC.

Income

Report average gross monthly income from every source: wages, self-employment, pensions, Social Security, rental income, dividends, and interest. Self-employed filers calculate net business income after ordinary and necessary monthly business expenses, and must complete Sections 4, 5, and 6 in addition to the personal sections.¹

Expenses and the Collection Financial Standards

You cannot simply list what you actually spend. The IRS measures your expenses against its Collection Financial Standards, which cap what it considers necessary. National standards apply uniformly by household size and cover food, clothing, housekeeping supplies, personal care, and miscellaneous expenses. Local standards vary by county and metro area and cover housing, utilities, and transportation.

The IRS currently allows up to $662 per month for vehicle ownership costs (loan or lease) on one car, and $1,324 for two cars.⁶ Housing and utility allowances swing significantly by location and family size. A single person in a low-cost rural county may be allowed $1,500 or less per month, while a family of five in a major metro area could see an allowance above $3,000.⁷

If your actual spending in a category is below the standard, report what you actually spend. If it exceeds the standard, you are generally capped at the standard unless you can show the extra expense is necessary for your family’s health and welfare or for earning income. Documentation and a clear explanation carry the weight here.

Documents to Attach

Every figure on the form needs backup, and the IRS will return the package if documents are missing or cover the wrong time periods.¹ Include:

The most recent pay stub or earnings statement from each employer.
Complete statements for all checking, savings, and investment accounts for the three most recent months.
A recent profit and loss statement if you have self-employment income.
Vehicle titles, property deeds, and current mortgage or loan statements to verify what you own and what you owe on it.

Use current documents. Statements from six months ago will not satisfy the IRS, and stale paperwork is one of the most common reasons packages come back before anyone looks at the merits.

Low-Income Certification

If your income falls under certain thresholds, a low-income certification waives both the $205 application fee and the required initial payment. Qualification is based on either the adjusted gross income from your most recently filed return or your household’s gross monthly income (from Form 433-A (OIC)) times 12, whichever is lower.²

Current thresholds for the 48 contiguous states:

1 person: $37,650
2 people: $51,100
3 people: $64,550
4 people: $78,000
5 people: $91,450
6 people: $104,900
7 people: $118,350
8 people: $131,800
Each additional person: add $13,450

Alaska and Hawaii have higher thresholds. Check the low-income box in Section 1 of Form 656 to claim the waiver. If you also select the periodic payment option, your first monthly payment is not due until 30 calendar days after acceptance, and you do not make installment payments while the IRS reviews the offer. Any payments you voluntarily send in the meantime get applied to the debt and are not returned.

Submitting the Package

A complete submission includes the signed Form 433-A (OIC), the signed Form 656, all supporting documents, and the required fee and initial payment unless you qualify for the low-income waiver. The application fee is $205 and is non-refundable.⁸

The initial payment depends on the offer type:

Lump sum: 20% of the total offer amount with your application. If accepted, the remaining 80% is paid in five or fewer installments.
Periodic payment: the first proposed monthly installment with your application, then continued monthly payments while the IRS reviews (unless you have a low-income certification).

Mail the package to the IRS processing center for your state. Taxpayers in Arizona, California, Colorado, Georgia, Hawaii, Idaho, Kentucky, Louisiana, Mississippi, New Mexico, Nevada, Oklahoma, Oregon, Tennessee, Texas, Utah, and Washington mail to the Memphis IRS Center. Everyone else, including the District of Columbia, Puerto Rico, and foreign addresses, mails to the Brookhaven IRS Center in Holtsville, New York.² Confirm the current addresses in Form 656-B before mailing.

What Happens After You File

Once the IRS accepts the package as processable, it suppresses balance-due notices and suspends collection activity, including levies, on the tax periods in the offer.⁹ That protection lasts until the offer is accepted, rejected, returned, terminated, or withdrawn.

Filing also suspends the 10-year collection statute of limitations. The clock stops from the date the offer is pending through the final decision. If the offer is rejected, the suspension continues for another 30 days, and if you appeal, it runs through the appeal.¹⁰ If your collection period is close to expiring, the IRS gains that extra time to collect should the offer fail.

The full investigation can take up to 24 months depending on inventory and complexity.¹¹ If the IRS does not reject the offer within 24 months of the submission date, it is deemed accepted by operation of law.¹²

If Your Offer Is Rejected

A rejection means the IRS reviewed the offer on its merits and decided the amount was too low or it otherwise did not meet the criteria. That is different from a return, which happens when the package is incomplete or the pre-filing rules were not met.

You have 30 days from the date on the rejection letter to request an appeal through the IRS Independent Office of Appeals.¹³ Miss it and the appeal option is gone. File using Form 13711 or a letter with the same information, and identify the specific items you disagree with and why. Common disputes involve the IRS overvaluing an asset, underestimating an allowable expense, or not accounting for special circumstances you raised in Section 3 of Form 656. Vague objections do not work.

Five Years of Compliance After Acceptance

Acceptance is not the finish line. For five years afterward, you must file every required return on time (extensions count) and stay current on all tax payments. Fall out of compliance and the IRS can default the offer and reinstate the entire original liability, minus what it already received.¹¹ Penalties and interest come back with it, and collection through levies and liens can resume. Missing a single filing deadline in year four can undo the whole thing. Set calendar reminders for every quarterly estimated payment and every filing deadline through the full five years.

1
Internal Revenue Service. Form 433-A (OIC) – Collection Information Statement for Wage Earners and Self-Employed Individuals
2
Internal Revenue Service. Form 656 Booklet – Offer in Compromise
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Internal Revenue Service. About Form 656, Offer in Compromise
4
Internal Revenue Service. Topic No. 204, Offers in Compromise
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Internal Revenue Service. IRM 5.8.5 Financial Analysis
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Internal Revenue Service. Local Standards: Transportation
7
Internal Revenue Service. 2025 Allowable Living Expenses Housing Standards
8
Internal Revenue Service. Offer in Compromise
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Internal Revenue Service. IRM 5.19.7 Monitoring Offer In Compromise
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Taxpayer Advocate Service. Understanding Your Collection Statute Expiration Date
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Internal Revenue Service. Offer in Compromise – Frequently Asked Questions
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Internal Revenue Service. IRM 4.18.1 Offers in Compromise Received in Exam
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Internal Revenue Service. Appeal Your Rejected Offer in Compromise (OIC)