Estimate your potential Offer in Compromise (OIC) amount.
Your Estimated Offer in Compromise Amount
$0.00
This is a simplified estimate. Consult a tax professional for accuracy.
Understanding the IRS Offer in Compromise (OIC)
An Offer in Compromise (OIC) allows certain taxpayers to resolve their tax debt with the IRS for a lower amount than they originally owed. It's a powerful tool for individuals and businesses facing significant financial hardship. The IRS generally approves an OIC when they believe the taxpayer cannot pay their full tax liability or when doing so would create a significant economic hardship.
The IRS evaluates an OIC based on the taxpayer's "Reasonable Collection Potential" (RCP). This calculation aims to determine how much the IRS could collect from the taxpayer if they were to aggressively pursue collection. The OIC amount offered typically needs to be at least the RCP.
Key Factors in the Calculation:
Total Tax Liability: The full amount of back taxes, penalties, and interest owed to the IRS.
Monthly Income: Your income after applicable taxes are deducted.
Allowable Monthly Expenses: The IRS has guidelines for what constitutes necessary living expenses. These are subtracted from your monthly income to determine your ability to pay.
Equity in Assets: The value of your assets (like real estate, vehicles, savings) minus any debts secured by those assets. The IRS generally expects you to liquidate assets to pay debts.
Future Income: The IRS considers your projected income over a period (often 12 months) to assess your ability to pay over time.
Simplified OIC Calculation Logic:
This calculator uses a simplified model to estimate the OIC amount. The core idea is to assess your financial capacity over a period, considering your income, necessary expenses, and asset liquidation.
The estimated OIC amount is primarily determined by your Reasonable Collection Potential (RCP). A common way to estimate RCP is:
RCP = (Monthly Income - Allowable Monthly Expenses) * 12 (for a 12-month period) + Equity in Assets
Additionally, a portion of Projected Future Income might be factored in. For simplicity in this calculator, we will consider the projected income over 12 months.
The offer amount you submit should ideally be close to or exceed this RCP to have a higher chance of acceptance.
Important Note: The IRS has complex rules and tables for determining allowable expenses and asset equity. This calculator provides a general estimate only. Factors like specific circumstances, type of OIC (Lump Sum Cash vs. Periodic Payment), and IRS discretion can significantly affect the final outcome. Always consult with a qualified tax professional or CPA experienced in Offer in Compromise cases for personalized advice.
Individuals or businesses with a large tax debt that they cannot realistically pay off.
Those facing asset seizure or wage garnishment.
Individuals who have exhausted other payment options.
function calculateOIC() {
var totalTaxLiability = parseFloat(document.getElementById("totalTaxLiability").value);
var allowableExpenses = parseFloat(document.getElementById("allowableExpenses").value);
var monthlyIncome = parseFloat(document.getElementById("monthlyIncome").value);
var equityInAssets = parseFloat(document.getElementById("equityInAssets").value);
var futureIncome = parseFloat(document.getElementById("futureIncome").value); // Projected income for 12 months
var resultElement = document.getElementById("result");
var resultValueElement = document.getElementById("result-value");
// Input validation
if (isNaN(totalTaxLiability) || isNaN(allowableExpenses) || isNaN(monthlyIncome) || isNaN(equityInAssets) || isNaN(futureIncome)) {
alert("Please enter valid numbers for all fields.");
resultElement.style.display = 'none';
return;
}
if (totalTaxLiability totalAllowableExpenses12Months) {
estimatedRCP = (futureIncome – totalAllowableExpenses12Months) + equityInAssets;
} else {
// If projected income doesn't even cover allowable expenses, the IRS might consider asset liquidation primarily.
estimatedRCP = equityInAssets;
}
// Ensure the offer is not more than the total liability
var potentialOICAmount = Math.min(estimatedRCP, totalTaxLiability);
// Ensure the offer is not negative
potentialOICAmount = Math.max(potentialOICAmount, 0);
resultValueElement.textContent = "$" + potentialOICAmount.toFixed(2);
resultElement.style.display = 'block';
}