Form 433-B & Form 656 Walkthrough for Business Offers

A business Offer in Compromise runs on two documents: Form 433-B (OIC) — the business’s financial statement — and Form 656 — the offer contract itself. The Form 656-B booklet sequences them as its Steps 3 and 5, and this page follows that pairing: who files 433-B, what each section captures, the minimum-offer math, and then Form 656’s sections where the numbers become terms. (Individuals and sole proprietors: your financial statement is Form 433-A, not this form.)

General tax information, not tax or legal advice. Download current revisions from IRS.gov; the 433-B (OIC) is revised periodically.

Who files Form 433-B — and who does not

• Files 433-B: corporations, partnerships, and LLCs taxed as corporations or partnerships, offering to compromise a business liability (e.g., employment taxes). Responsible individuals may additionally be asked for their own 433-A statements — the IRS looks through the entity at the people who control its cash.
• Does NOT file 433-B: sole proprietors and single-member LLCs taxed as disregarded entities — their business is reported inside their personal 433-A (self-employment section). Seattle Tax Attorney’s 433-B guide opens with this same sorting rule, because filing the wrong financial statement is a classic return-without-review defect.

Form 433-B, section by section

Business information — legal name, EIN, entity type, address, nature of business, owners/officers and their ownership shares. Accuracy here matters beyond paperwork: the IRS cross-checks against its business master file and the trust-fund recovery penalty records.

Business assets — bank accounts, receivables, inventory, equipment, real property, intangibles: current value, amounts owed, equity. Examiners apply the same quick-sale discipline as individuals (≈80% of value), with one business-critical refinement: assets essential to producing income (the equipment the business cannot operate without) may be excluded or discounted where removing them would destroy the income the offer itself depends on — the income-producing-asset concept the booklet and practitioner guides (TRP Tax, IRS Tax Pros) both flag. Claim it deliberately, with the reasoning stated, not silently.

Business income — gross receipts by source, typically from recent returns and current-year books. Expect the examiner to reconcile against filed Forms 941/1120/1065 and bank deposits.

Business expenses — necessary operating expenses: payroll, rent, materials, utilities, insurance, taxes. Owner draws and related-party payments above market get re-characterised as income — fast.

Minimum-offer computation — the form’s boxes combine Box A (total net realizable equity) with the future-income component (Boxes E/F: monthly remaining business income × 12 or × 24) to produce the business’s minimum offer, exactly parallel to the individual computation (worksheet practice).

Form 656 — where the numbers become an offer

• Section 1–2 (taxpayer & periods): the entity (and any individual co-offerors) and the exact tax periods/forms being compromised — omissions here leave periods uncompromised even if the offer is accepted.
• Section 3 (reason): the ground — doubt as to collectibility for nearly all business offers; doubt as to liability where the assessment itself is disputed.
• Section 4 (payment terms): the offer amount from your 433-B computation, structured as lump sum (20% down, balance ≤5 payments/≤5 months after acceptance) or periodic (first payment enclosed, monthly during review) — the structures compared on the payment-options page.
• Low-income certification section: printed on Form 656 — but note, businesses cannot claim it: certification is for individuals (including sole proprietors) only. Business filers pay the $205 fee without exception.
• Terms & signatures: the compromise conditions (future compliance, refund offsets, lien retention until paid) and authorised signatures — for an entity, an officer with documented authority.

Assemble the business packet

• Form 656 + Form 433-B (current revisions), signed
• Owners’ 433-A statements if requested/applicable
• Business bank statements (recent 6–12 months), recent filed returns (941s, entity return)
• Asset valuations and loan balances; receivables ageing
• $205 fee (separate instrument) + initial payment (separate instrument) — fee rules Then follow the application sequence for mailing and in-review duties.

Frequently asked questions

What is Form 433-B? The Collection Information Statement for Businesses, in its Offer in Compromise version — the financial statement on which a business offer’s minimum amount is computed (Seattle Tax Attorney’s guide opens with exactly this definition and audience split).

Do I qualify for Low-Income Certification? As a business filer: no — certification exists only for individuals and sole proprietors (it is printed on Form 656 in the individual context). Entity offers always carry the $205 fee and the applicable initial payment.

How much does it cost to apply for an Offer in Compromise? The same $205 application fee as individuals, plus the structure’s initial payment (20% lump-sum or first periodic instalment) (TaxWave FAQ) — with the fee on a separate check from the payment, per Form 656-B.

General tax information, not tax or legal advice. Sources: Form 433-B (OIC) and Form 656 current revisions; Form 656-B booklet (Steps 3 and 5); Seattle Tax Attorney and TRP Tax 433-B guides; TaxWave (questions). Reviewed 2026-10-22.