The Financial Statement Behind a Payment Plan: Forms 433-F and 433-A Explained

Most people setting up an IRS payment plan never fill out a financial statement. The Simple Payment Plan and the guaranteed agreement skip it entirely. But if your balance is above $50,000 and a revenue officer has your case, if your payment will not clear the balance before the collection statute runs, or if you are asking for a partial payment plan, the financial statement is where your monthly payment gets decided.

The math is simple. The rules inside it are not. Your payment is your income minus your allowable expenses, and the IRS decides what allowable means.

Which form

IRM 5.15.1 lists the collection information statements the IRS uses:

• Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. The long form, used in Field Collection and for offers.
• Form 433-B, Collection Information Statement for Businesses.
• Form 433-F, Collection Information Statement. The shorter form used by the Automated Collection System and the campuses for individuals. Revenue officers may also use it for individuals who owe only individual liabilities with an aggregate assessed balance under $250,000.
• Form 433-H, Installment Agreement Request and Collection Information Statement, which combines the request and the statement.

Every one of these forms asks about digital assets now; IRM 5.15.1 states taxpayers are required to report their interest in digital assets on Forms 433-A, 433-B and 433-F. Leave nothing off. A statement that turns out to be inaccurate or incomplete is grounds to terminate the agreement later under IRC 6159(b)(2).

The IRS also checks what you report against what it already knows. For partial payment agreements, IRM 5.14.2.2.1 has employees compare your reported income with your last return and other IRS data, and discuss any drop of 20 percent or more.

The necessary expense test

Every expense the IRS allows has to pass one test, defined in IRM 5.15.1.8: the expense must be necessary to provide for your and your family's health and welfare or for the production of income. The IRS sorts allowable expenses into three groups.

• Allowable living expenses, set by the Collection Financial Standards.
• Other necessary expenses, which meet the test and are normally allowed in a reasonable amount.
• Other conditional expenses, which may not meet the test but can be allowed depending on the facts, and which come into play under the six-year rule.

National Standards: allowed in full

The National Standards cover food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous items, all in one figure. The key word in the IRM is full: taxpayers are allowed the total National Standards amount for their family size without questioning the amounts they actually spend. Under the standards effective June 29, 2026, the monthly figures are $867 for one person, $1,558 for two, $1,857 for three and $2,176 for four.

Out-of-pocket health care has its own National Standard, allowed per person: $90 a month for each person under 65 and $163 a month for each person 65 or older under the June 29, 2026 standards. Health insurance premiums are a separate other necessary expense.

That miscellaneous slice of the National Standards matters. The IRS generally treats credit cards as a payment method, not an expense, and IRM 5.15.1 says taxpayers should be told that the National Standards include an amount for miscellaneous expenses that can be applied to credit card debt.

Local Standards: the lesser of actual or standard

Housing and utilities, and transportation, are Local Standards. Here the rule flips. You are normally allowed the standard or the amount you actually pay, whichever is less.

Housing and utilities are set by county and family size and include mortgage or rent, property taxes, insurance, maintenance, utilities, internet and phone. Transportation is split into ownership costs, set nationally, and operating costs, set by region or metro area. Under the June 29, 2026 standards, the ownership cost allowance is $703 a month for one vehicle and $1,406 for two. Operating costs in the South region are $291 a month for one vehicle. A household with no vehicle gets a public transportation allowance of $220 a month. If you own a car with no loan payment, you get the operating cost only.

The standards are guidelines, not ceilings carved in stone. IRM 5.15.1.8 says that if a standard amount is inadequate to provide for a specific taxpayer's basic living expenses, a deviation is allowed with reasonable substantiation. It also notes a deviation is not allowed merely because it is inconvenient to sell a valuable asset or reduce an excessive expense.

Other necessary expenses

IRM 5.15.1.11 lists common other expenses and when each is allowed. A few that come up constantly:

• Current year taxes, including federal, state, local, Social Security and Medicare, are allowed regardless of whether you paid them in the past.
• Child care, if it meets the necessary expense test and is reasonable in amount.
• Term life insurance on the taxpayer's own life. Whole life policies are treated as assets to borrow against or cash in.
• Secured debts, if they meet the test and you substantiate the payments.
• Federally guaranteed student loans for your own post-high school education, if you substantiate the payments.
• Involuntary deductions that are a condition of the job, such as union dues and uniforms.
• Delinquent state and local taxes, in certain circumstances, when you provide complete financial information and verification of the state liability.

Voluntary retirement contributions are not on that list. IRM 5.15.1 tells revenue officers to advise taxpayers that contributions to voluntary retirement plans are not a necessary expense, and that continuing them while claiming an inability to pay may be questioned.

Other items commonly fail the test. Charitable contributions are disallowed unless they are a condition of employment or otherwise meet the necessary expense test; IRM 5.15.1.11 gives the example of a minister required to tithe by an employment contract. Payments on unsecured debts other than those needed to produce income are not allowed when the tax, with projected accruals, could be paid in full within 90 days.

How many people, and whose income

The household size for the National Standards should generally match the taxpayers and dependents on your current year return. If you live with someone who is not liable for the tax, the IRS counts household income and allocates shared expenses. IRM 5.15.1 gives the formula: if you earn $20,000 and the non-liable person earns $5,000, you have 80 percent of household income, and you are allowed 80 percent of the shared allowable expenses, plus all of the expenses that are solely yours.

The IRS typically reviews the last three months of expenses. If those months are not representative, IRM 5.15.1 says additional months, up to a year, may be reviewed. Seasonal workers and commission earners should ask for that.

Where the six-year rule changes everything

Everything above describes the strict version. There is a softer one. If your balance, including projected accruals, can be paid within six years and before the collection statute expires, IRM 5.14.1.4.1 allows the IRS to accept all of your expenses as long as they are reasonable, without substantiation. Minimum credit card payments are generally allowed under that rule too. It is the most valuable exception in this area, and I cover it in the six-year rule.

Building a statement that holds up

A financial statement is a sworn document. Treat it that way. Report every account, every vehicle, every source of income. Then claim every expense you are entitled to, with the paper to back it up: leases, loan statements, insurance declarations, day care invoices, pay stubs showing deductions.

If you are unrepresented and need help, IRM 5.15.1 notes you may be eligible for help from a Low Income Taxpayer Clinic. Either way, the number the statement produces is the number you will live with for years. Build it carefully, and test the resulting payment against the balance with the payment plan calculator before you sign.