Offer in compromise calculator

Estimates only. The IRS uses a detailed formula with specific asset and expense rules that can differ from this simplified estimate. This calculator provides a general range for planning purposes only. A tax attorney confirms your actual offer amount. See our full disclaimer.

Offer in compromise estimator

Your assets

Bank account balances ($)

Other assets minus loans owed on them ($) Vehicles, retirement accounts, real estate equity, and similar.

Monthly income and expenses

Total monthly household income ($)

Allowable monthly living expenses ($) Housing, utilities, food, transportation, and other IRS-allowed expenses.

Payment plan

How do you plan to pay the offer if accepted? This affects how many months of future income the IRS counts in the formula.

Your estimated minimum offer amount

Get a free Offer in Compromise review

The IRS rejects more OIC applications than it accepts, often over calculation errors. A tax attorney reviews your figures and improves your odds at no cost for the initial consultation.

How does the IRS actually calculate an acceptable offer?

The IRS uses a formula called Reasonable Collection Potential, or RCP, which adds your net equity in assets to your future income potential. Future income is calculated as your monthly disposable income - income minus allowable living expenses - multiplied by either 12 or 24 months depending on whether you propose a lump-sum or periodic payment plan. Your offer generally needs to meet or exceed this RCP number to be accepted.

This is why the formula matters more than what you feel you can afford - the IRS isn't negotiating in the traditional sense, it's checking your offer against its own calculation of what it could otherwise collect from you. If a lien is already attached to your accounts or property, understanding your lien removal options alongside your offer matters, since the lien process and OIC process interact but aren't the same thing. And if the underlying debt stems from a disputed audit finding, resolving that dispute first sometimes changes the debt amount before you even calculate an offer.

What counts as an "allowable" living expense?

The IRS publishes national and local standard amounts for expenses like housing, utilities, food, and transportation, and generally caps what you can claim at those standard amounts regardless of what you actually spend. Spending significantly above the standard, even if genuinely necessary, often gets excluded from your expense calculation unless you can document a specific medical or other qualifying need.

Why does the IRS reject so many OIC applications?

Common reasons include offers that fall below the calculated RCP, incomplete financial disclosure, math errors in the application itself, and failure to stay current on tax filings and payments while the offer is pending. The IRS requires strict compliance with all filing and payment obligations during the review period, and a single missed estimated payment can derail an otherwise strong application.

What happens if your offer is accepted?

You must pay the accepted amount according to your chosen schedule and remain in full tax compliance for 5 years afterward, or the IRS can reinstate the original full debt. Any tax refunds due in the year your offer is accepted are also generally applied to the settlement rather than sent to you, which surprises some applicants who don't anticipate this rule.

Frequently asked questions about the Offer in Compromise

The IRS charges an application fee, generally a few hundred dollars, though low-income taxpayers can qualify for a fee waiver. You also submit an initial payment with your application - either 20% of the lump-sum offer or your first periodic payment - which is generally non-refundable even if the offer is rejected.

Processing commonly takes 6 months to a year, sometimes longer for complex cases. During this period, active IRS collection efforts like levies are generally paused, though this pause is not guaranteed in every situation. Staying compliant with filing and payment obligations throughout the entire review period is essential regardless of how long it takes.

Yes. You generally have 30 days to request an appeal through the IRS Office of Appeals if your offer is rejected. Appeals sometimes succeed when the original rejection was based on a calculation dispute or missing documentation that can be clarified, so a rejection isn't necessarily the end of the process.

You generally cannot submit an Offer in Compromise while an open bankruptcy case is pending - tax debt in bankruptcy is handled through the bankruptcy process instead. If you're considering both options, understanding which path fits your overall debt picture, not just your tax debt, matters before choosing either one.

Yes. Installment agreements, penalty abatement for reasonable cause, and Currently Not Collectible status are all alternatives that don't reduce the total debt but can significantly ease the burden of paying it. These options often have simpler application requirements than a full OIC and may fit your situation better depending on your specific finances.