Offer in Compromise Calculator

How this Offer in Compromise calculator helps

This calculator estimates your potential minimum IRS Offer in Compromise (OIC) amount by approximating your reasonable collection potential (RCP). RCP is what the IRS thinks it can collect from you through your assets and future income. Your offer generally must be at least as high as your RCP for the IRS to consider accepting it.

Use this tool as an educational starting point to see whether an OIC might be worth exploring and how your income, expenses, and assets affect a potential settlement amount. It is not an official IRS calculator and does not replace professional tax advice.

Key formulas used in this calculator

The calculator follows the basic structure of the IRS OIC methodology:

1. Net equity in assets

First, it estimates your net equity in assets:

Net equity in assets = Total asset value − Loans against assets

Assets can include bank accounts, investments, vehicles, real estate, and certain retirement accounts. Loans include mortgages and auto loans that are secured by those assets.

2. Monthly disposable income

Next, the calculator estimates your monthly disposable income:

Monthly disposable income = Monthly gross income − Monthly allowable expenses

Allowable expenses are based on IRS standard allowances (for housing, food, transportation, etc.), not necessarily your actual spending. For best results, enter expenses that reflect those standards, not your real-world bills.

3. Future income component

The IRS multiplies your disposable income by a number of months, depending on how you plan to pay the offer:

• Lump sum offer: Disposable income × 12 months
• Periodic payment offer: Disposable income × 24 months

4. Total reasonable collection potential (RCP)

The calculator then combines net asset equity and future income:

RCP = Net equity in assets + Future income

The core formula in MathML form:

Where MonthsFactor is 12 for a lump sum offer and 24 for a periodic payment offer.

How to interpret your result

After you enter your information and run the calculation, you will see an estimated minimum acceptable offer amount. Compare this figure with your total IRS tax debt:

• Estimated offer is much lower than your tax debt: You may be a stronger candidate for an OIC, assuming your information is accurate and consistent with IRS standards.
• Estimated offer is close to or higher than your tax debt: The IRS may expect you to pay the full amount or use an installment agreement instead of an OIC.
• Negative or very low disposable income: This can reduce the future income component, but the IRS will carefully review whether expenses are reasonable and within official allowance ranges.

The calculator gives a simplified estimate only. The IRS can adjust both your allowable expenses and asset values during its detailed review.

Worked example

Consider a taxpayer with the following situation:

• Monthly gross income: $4,000
• Monthly allowable expenses (per IRS standards): $3,200
• Total asset value: $25,000
• Loans secured by assets: $15,000
• Total IRS tax debt: $60,000
• Offer type: Lump sum (pay within 5 months)

Step-by-step:

1. Net equity in assets = $25,000 − $15,000 = $10,000
2. Disposable income = $4,000 − $3,200 = $800 per month
3. Future income (lump sum) = $800 × 12 = $9,600
4. Estimated RCP = $10,000 + $9,600 = $19,600

In this example, the calculator would estimate a minimum offer around $19,600. Since this is significantly less than the $60,000 debt, it suggests that an OIC might be worth exploring. However, the IRS could still adjust expenses, question asset values, or reject the offer based on other factors.

Offer types compared

The table below summarizes how the calculator treats lump sum offers versus periodic payment offers.

Assumptions and limitations

This calculator uses a simplified version of IRS rules. Important assumptions include:

• Federal IRS income tax debt only: It is designed for federal IRS tax debt, not state or local taxes, business payroll taxes, or other liabilities.
• User-entered data: Results are only as accurate as the income, expense, and asset values you enter.
• Standard allowances: It assumes your reported expenses align with IRS national and local collection financial standards, which may differ from your real expenses.
• Simplified asset valuation: The IRS often uses "quick sale value" (commonly around 80% of fair market value). This tool uses your entered totals and does not adjust each asset individually.
• No bankruptcy: The tool assumes you are not in an open bankruptcy case; taxpayers in bankruptcy are not eligible for an OIC.
• No special circumstances: It does not fully model special circumstances such as serious illness, advanced age, or other factors used under Effective Tax Administration offers.
• Single combined profile: It treats your situation as one combined financial picture and does not separately analyze spouses, businesses, or multiple entities.

Because of these limitations, use the results as a rough guide only. For a full analysis, you would need to complete IRS Form 433-A (OIC) or 433-B (OIC) and possibly work with a qualified tax professional.

When an Offer in Compromise may or may not make sense

An OIC tends to be more realistic when:

• Your total tax debt is large compared with what you can reasonably pay over the remaining collection period.
• Your income is modest relative to necessary living expenses under IRS standards.
• You do not have substantial equity in assets that could easily be used to pay the debt.

An OIC may be less likely to succeed when:

• You have significant equity in real estate, investments, or retirement accounts.
• Your disposable income is high after allowable expenses.
• You could pay the full balance through an installment agreement within the time the IRS has to collect.

FAQs about using this calculator

Does this calculator guarantee IRS acceptance?

No. The calculator only estimates a possible minimum offer amount based on simplified inputs. The IRS reviews detailed financial information, may adjust your expenses and asset values, and can accept or reject an offer for many reasons.

Should I include my spouse’s income?

If your spouse’s income is considered in your household finances or if you are jointly liable for the tax, then their income often matters for OIC calculations. For a quick estimate, many users include all household income and shared expenses, but complex joint situations should be reviewed with a tax professional.

Can I use this for state tax debts?

No. This tool is built around federal IRS guidelines. State tax agencies may have their own settlement programs with different rules and formulas.

What if I am already on an installment agreement?

You may still be able to apply for an OIC, but the IRS will look at your full financial situation. Use this calculator to see whether your estimated offer is significantly lower than your remaining balance, then discuss options with a tax professional.

Important: Educational use only

This Offer in Compromise calculator is provided for general educational and planning purposes. It is not affiliated with the IRS, does not submit any information to the IRS, and does not provide legal, tax, or financial advice. Your situation may involve complex factors that this tool cannot model. Consider consulting an enrolled agent, CPA, or tax attorney before making decisions about OIC applications, installment agreements, or other collection options.