IRS Offer in Compromise
How an IRS offer in compromise works, how the IRS calculates your minimum offer, lump-sum vs periodic payment options, and a calculator.
Offer in compromise minimum offer calculator
IRS offer in compromise: how the minimum is figured
An offer in compromise lets you settle a tax debt for less than you owe if paying in full would be a hardship. The IRS generally accepts an offer equal to your reasonable collection potential: the net equity in your assets (usually 80% of quick-sale value minus loans) plus your future disposable income (monthly income minus allowable expenses) times 12 for a lump-sum offer or 24 for a periodic-payment offer. Use the IRS's pre-qualifier tool and Form 433-A (OIC) to work out your numbers.
Applying
- File Form 656 with Form 433-A (OIC) and the application fee; low-income applicants can have the fee and payment waived.
- Lump-sum offers include 20% of the offer with the application; periodic offers start monthly payments while the IRS reviews.
- You must have filed all required returns and made required estimated payments.
- If the IRS doesn't decide within two years, the offer is generally accepted.
Many people who don't qualify can use an installment agreement instead.
Common questions
How does the IRS calculate an offer in compromise?
Net equity in assets plus future disposable income times 12 (lump sum) or 24 (periodic payments).
Can anyone get an offer in compromise?
No, it's for people who can't pay in full; the IRS pre-qualifier tool helps check.
What forms are needed?
Form 656 and Form 433-A (OIC), with the application fee unless you qualify for the low-income waiver.
Sources
More paycheck and tax calculators: IRS Mileage Rate · IRS Nonprofit Search · IRS Payment Plans · IRS Tax Transcript Request
Related
General information, not financial, tax or legal advice. Check important numbers with the official source before acting on them.