Settling Business Tax Debt With an Offer in Compromise
When a corporation, partnership, or multi-member LLC falls behind on federal taxes, the IRS offers the same basic relief valve available to individuals: the Offer in Compromise (OIC). But operating businesses don't use the same paperwork as individual taxpayers. Instead, they file Form 433-B (OIC), a Collection Information Statement built specifically for business finances.
Getting this form right is the difference between an offer the IRS takes seriously and one that gets rejected for missing or misvalued information. Here's what business owners need to know before they file.
What Is IRS Form 433-B (OIC)?
Form 433-B (OIC) is the official Collection Information Statement used by businesses — C-corporations, S-corporations, partnerships, and multi-member LLCs — to disclose assets, liabilities, income, and expenses when applying for an Offer in Compromise. It gives the IRS a full financial snapshot of the business so it can evaluate what the company can realistically afford to pay toward its tax debt.
Form 433-A (OIC) vs. Form 433-B (OIC): What's the Difference?
The form you file depends entirely on how the business is structured and who is submitting the offer:
- Form 433-A (OIC) is for individual taxpayers, wage earners, and self-employed sole proprietors.
- Form 433-B (OIC) is for operating business entities — C-corporations, S-corporations, partnerships, and multi-member LLCs.
A single-member LLC that hasn't elected corporate tax treatment is generally treated as a disregarded entity, so its owner typically files Form 433-A (OIC) instead. Getting the entity classification wrong is one of the most common reasons an offer stalls in processing.
How the IRS Values Business Assets on Form 433-B
The IRS doesn't use fair market value when it calculates what a business can pay. Instead, it uses Quick Sale Value (QSV) — a discounted figure meant to reflect what an asset would fetch in a fast, forced sale rather than an open-market transaction over time.
QSV is typically calculated as 80% of Fair Market Value (FMV), minus any outstanding loans or secured liens against the asset. This applies to equipment, vehicles, inventory, accounts receivable, and real property the business owns. Understating or overstating these values is one of the fastest ways to get an offer rejected or delayed for additional documentation.
Can a Business Submit an OIC While Owing 941 Payroll Taxes?
Yes — but only under specific conditions. A business that owes 941 payroll tax can still submit an Offer in Compromise, provided it is current on all federal tax deposits (FTDs) for the current and immediately prior quarters, and has filed all required business tax returns. The IRS will not process an offer from a business that is actively falling further behind on payroll tax deposits, since that signals the underlying compliance problem hasn't been resolved.
Businesses catching up on delinquent 941 deposits before filing an offer should get current first — an OIC submitted while deposits are still lapsing is likely to be returned without full consideration.
Frequently Asked Questions
What is IRS Form 433-B (OIC)?
IRS Form 433-B (OIC) is the official Collection Information Statement used by businesses (corporations, partnerships, and multi-member LLCs) to disclose assets, liabilities, income, and expenses when applying for an Offer in Compromise to settle tax debt.
What is the difference between Form 433-A (OIC) and Form 433-B (OIC)?
Form 433-A (OIC) is for individual taxpayers, wage earners, and self-employed sole proprietors. Form 433-B (OIC) is specifically designed for operating business entities such as C-Corporations, S-Corporations, Partnerships, and LLCs.
How does the IRS value business assets on Form 433-B?
The IRS calculates business asset value using Quick Sale Value (QSV), which is typically 80% of Fair Market Value (FMV) minus any existing loans or secured liens.
Can an operating business submit an Offer in Compromise while owing 941 payroll taxes?
Yes, but the business must be current on all federal tax deposits (FTDs) for the current and prior quarters, and must have filed all required business returns before the IRS will process the offer.
Talk to a Tax Attorney Before You File
Form 433-B (OIC) is unforgiving of valuation mistakes and missing documentation — and a rejected offer can cost months of collection exposure. Wolf Tax's attorney-led team can help you value business assets correctly, confirm your 941 deposits are current, and build an offer the IRS is prepared to accept.
