IRS Offer In Compromise Calculator

An IRS Offer in Compromise calculator estimates a possible tax settlement amount by reviewing your net asset equity, monthly income, allowed living expenses, and payment option. The IRS does not base your settlement only on how much you owe. It looks at what it believes it can reasonably collect from you.

Need More Information about the IRS Offer in Compromise Program? Check out the Ultimate OIC Guide: Click Here

How the IRS Offer in Compromise Calculation Works

The IRS calculation usually starts with this basic formula: Net asset equity plus future disposable income equals the estimated offer amount.

Future disposable income is generally calculated by taking monthly income, subtracting allowable expenses, then multiplying the remaining amount by the number of months tied to the offer payment terms. IRS financial analysis guidance explains that future income is generally based on projected gross monthly income minus allowable expenses, multiplied by the applicable number of months

Your IRS OIC Payment Option Can Change the Offer Amount

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The payment option matters. A lump sum offer generally requires 20 percent of the offer amount with the application, with the balance paid in five or fewer payments if accepted. A periodic payment offer requires the first proposed payment with the application and continued monthly payments while the IRS reviews the offer. Low income certification may remove the application fee and initial payment requirement.

Before You Submit an Offer in Compromise

Before the IRS reviews the offer amount, basic eligibility matters. You generally need to have all required tax returns filed, required estimated tax payments made, no open bankruptcy case, and current employer tax deposits made if you own a business with payroll.

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The basic IRS OIC Formula is broken down to 3 main parts:

  1. Your Net Value of Assets

  2. Monthly Income Sources

  3. Monthly Household Expenses

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Net Value of Assets

When the IRS evaluates an Offer in Compromise (OIC), they consider several types of assets to determine your Reasonable Collection Potential (RCP). These assets include:

  1. Bank accounts: The balances in your checking and savings accounts.

  2. Investments: Stocks, bonds, and other investment accounts.

  3. Real estate: The market value of any property you own.

  4. Vehicles: The value of cars, boats, and other vehicles.

  5. Personal property: Items like jewelry, art, and collectibles.

  6. Equity in assets: The IRS also considers the equity you have in these assets, which is the market value minus any loans or mortgages against them.

  7. Other Assets: The IRS evaluates the net value of other assets and items of value you own.

The goal is to review whether asset equity should be included in your reasonable collection potential.

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What income sources the IRS evalaute for an offer in compromise

When evaluating an Offer in Compromise (OIC), the IRS considers several sources of income to determine your Reasonable Collection Potential (RCP). These income sources include:

  1. Wages and salaries: Income from your job or employment.

  2. Business income: Earnings from any business or self-employment activities.

  3. Investment income: Interest, dividends, and other returns on investments.

  4. Rental income: Money earned from renting out property.

  5. Retirement income: Pensions, annuities, and other retirement benefits.

  6. Social Security benefits: Payments received from Social Security.

  7. Alimony: Payments received as part of a divorce settlement.

  8. Other sources: Any other income, such as royalties, trust distributions, and unemployment benefits.

The IRS will look at your current income and may also consider your future income potential to ensure they can collect the maximum amount possible

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Local Standards (varies by location)

  1. Housing and utilities: Monthly allowance based on your county and family size.

  2. Transportation: Monthly allowance based on your region and family size.

The IRS also allows for out-of-pocket health care expenses and minimum payments on student loans or credit cards if they meet the necessary expense test

When submitting an Offer in Compromise (OIC), the IRS allows certain living expenses based on National Standards and Local Standards

National Standards (applies nationwide)

  1. Food: Monthly allowance based on family size.

  2. Housekeeping supplies: Monthly allowance based on family size.

  3. Apparel and services: Monthly allowance based on family size.

  4. Personal care products and services: Monthly allowance based on family size.

  5. Miscellaneous: Monthly allowance for expenses not covered by other categories

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IRS Offer in Compromise Calculator FAQS

  • An IRS Offer in Compromise calculator can give you a helpful estimate to settle your IRS tax debt, but it is not a final IRS decision. The IRS still reviews your full financial picture, including income, allowed expenses, asset equity, filing compliance, and supporting documents.

  • No. The amount owed is only part of the picture. The IRS focuses more on what it believes it can collect from your income, expenses, and assets.

  • Usually, no. The IRS generally requires all required tax returns to be filed before it will process an Offer in Compromise.

  • That does not always mean you are stuck. You may need to review other tax relief options, such as a payment plan, Currently Non Collectible status, or a Partial Payment Installment Agreement.

  • You usually need proof of income, bank statements, household expenses, vehicle information, real estate information, business income records if self employed, and proof of debts or necessary expenses.

  • Yes. An Offer in Compromise calculator can help you estimate whether settlement may be realistic before you contact the IRS or submit paperwork. It gives you a starting point by reviewing income, expenses, assets, and ability to pay. The calculator should not be treated as a final answer because the IRS will still review your full financial records and supporting documents.

  • Your estimate may be higher than expected because the IRS does not only look at your tax debt. It looks at what it believes you can pay from your income, bank accounts, vehicles, real estate, retirement accounts, and other assets. Even if you cannot pay the full balance today, the IRS may still calculate a higher offer if it believes there is money available through monthly disposable income or asset equity.

  • The Semper Tax Relief Offer in Compromise Calculator is designed to help you estimate how the IRS may look at your income, expenses, assets, and ability to pay before you move forward with an offer. The IRS Offer in Compromise Pre Qualifier Tool is the government tool that helps taxpayers check basic eligibility and prepare a preliminary proposal. The IRS tool is helpful, but it is still only a guide. It does not guarantee the IRS will accept your offer. The IRS makes the final decision after reviewing your full financial situation, tax compliance, and supporting documents.

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