Offer in Compromise Pre-Qualifier Calculator
This tool estimates whether you may qualify for an IRS Offer in Compromise (OIC) by calculating your Reasonable Collection Potential (RCP) and comparing it to your total tax debt. An OIC allows eligible taxpayers to settle their tax debt for less than the full amount owed.
Tax Debt
Assets (Quick Sale Value)
Enter the quick sale value (typically 80% of fair market value) of each asset.
Monthly Income
Monthly Allowable Living Expenses
Use IRS National and Local Standards for allowable expenses. Enter your actual allowable amounts below.
Payment Terms
Formula
Reasonable Collection Potential (RCP) is the core metric the IRS uses to evaluate an OIC:
Total Asset Equity = Bank Accounts + Investments + Real Estate Equity
+ Vehicle Equity + Other Assets
(each at Quick Sale Value ≈ 80% of Fair Market Value)
Monthly Disposable = Monthly Gross Income − Total Allowable Monthly Expenses
Income (MDI) (Allowable expenses per IRS National & Local Standards)
Future Income = MDI × Payment Multiplier
Component Lump Sum Cash (≤5 months): MDI × 12
Periodic Payment (6–24 months): MDI × 24
RCP (Minimum Offer) = Total Asset Equity + Future Income Component
Pre-Qualifier Test = RCP < Total Tax Debt → May Qualify
RCP ≥ Total Tax Debt → Likely Does Not Qualify
Assumptions & References
- Quick Sale Value: The IRS values assets at their quick sale value, generally 80% of fair market value (FMV), reflecting what could be obtained in a forced or expedited sale.
- Allowable Expenses: The IRS uses National Standards (food, clothing, personal care, out-of-pocket health care) and Local Standards (housing, utilities, transportation) to determine allowable living expenses. Actual expenses above these standards are generally not allowed unless documented and justified.
- Payment Multiplier: Per IRS OIC guidelines — Lump Sum Cash offers (paid in 5 or fewer installments within 5 months of acceptance) use a multiplier of 12; Periodic Payment offers (paid in 6 or more monthly installments within 24 months) use a multiplier of 24.
- Retirement Accounts: The IRS generally includes retirement account balances as assets, though early withdrawal penalties and taxes may be considered.
- Eligibility Requirements: To be eligible, taxpayers must have filed all required tax returns, made all required estimated tax payments, and not be in an open bankruptcy proceeding.
- Application Fee: A non-refundable $205 application fee is required when submitting Form 656 (waived for low-income taxpayers meeting the Low Income Certification guidelines).
- Doubt as to Collectibility: This calculator addresses the most common OIC basis — Doubt as to Collectibility (DATC). Other bases include Doubt as to Liability (DATL) and Effective Tax Administration (ETA).
- References:
- IRS Form 656-B, Offer in Compromise Booklet
- IRS Publication 594, The IRS Collection Process
- Internal Revenue Code §7122
- Treasury Regulation §301.7122-1
- IRS Collection Financial Standards: irs.gov
- IRS OIC Pre-Qualifier Tool: irs.treasury.gov
- Disclaimer: This calculator provides an estimate only and does not guarantee OIC acceptance. Consult a licensed tax professional or enrolled agent before submitting an OIC application.