Offer in Compromise Estimator
Estimate the minimum offer amount the IRS may accept under the Doubt as to Collectibility (DATC) standard, based on your Reasonable Collection Potential (RCP).
Formula
Reasonable Collection Potential (RCP) = Asset Equity + Future Income Component
- Asset Equity = Quick Sale Value (QSV) of all assets minus secured liabilities
- QSV = 80% of Fair Market Value (FMV) for most assets
- Cash is valued at 100%
- Home Equity = (Home FMV × 80%) − Mortgage Balance
- Vehicle Equity = (Vehicle FMV × 80%) − Loan Balance
- Retirement/Investment Equity = Account Value × 80%
- Monthly Disposable Income (MDI) = Gross Monthly Income − Total Allowable Monthly Expenses
- Future Income Component:
- Lump Sum Cash offer: MDI × 12 months
- Periodic Payment offer: MDI × 24 months
- Minimum Offer = RCP (rounded up to nearest dollar)
Assumptions & References
- Based on IRS Doubt as to Collectibility (DATC) OIC standard — the most common basis for an OIC (IRC § 7122).
- Quick Sale Value (QSV) of 80% reflects the IRS assumption that assets sold quickly yield less than full FMV (IRS Form 656-B, Offer in Compromise Booklet).
- Allowable expenses are limited to IRS National Standards (food, clothing, personal care, out-of-pocket health) and Local Standards (housing, utilities, transportation) — actual expenses are only allowed if lower than the standard, except for housing/utilities where actual may be used if higher with justification.
- Retirement accounts: IRS uses 80% of current value; early withdrawal penalties are generally not considered.
- Lump Sum multiplier of 12 and Periodic Payment multiplier of 24 are per IRS Form 656 instructions and IRM 5.8.5.
- This tool does not account for Doubt as to Liability (DATL) or Effective Tax Administration (ETA) OIC bases.
- This is an estimate only and does not constitute tax or legal advice. Consult a licensed tax professional or Enrolled Agent for a formal OIC submission.
- References: IRS Form 656-B (OIC Booklet), IRS Form 433-A (OIC), IRM 5.8, IRC § 7122.