About the IRS Offer in Compromise Calculator
An offer in compromise (OIC) lets you settle a federal tax debt for less than the full amount when paying in full would be impossible or a hardship. The IRS will generally accept an offer only if it equals or exceeds your reasonable collection potential (RCP): the equity in your assets plus the income you could pay over the next one or two years. This offer in compromise calculator follows the minimum-offer worksheet in Form 433-A (OIC), Rev. 4-2026.
Asset equity uses quick-sale value — 80% of current market value — minus loans, with the form’s allowances: the first $1,000 of bank balances, $3,450 per vehicle (one, or two on a joint offer) and $11,980 for furniture, personal effects and other valuables. Future remaining income is your monthly income minus allowable living expenses, multiplied by 12 if you pay in five or fewer payments within five months, or by 24 if you pay over 6 to 24 months.
Expenses must generally fit the IRS Collection Financial Standards, so enter allowable amounts rather than everything you spend. Use the result to judge whether an offer is realistic before paying the $205 application fee; low-income filers can qualify to have the fee and initial payment waived.
With the default inputs, the estimated minimum offer amount is $18,550.00. Change any value above to recalculate instantly.
How to use the irs offer in compromise calculator
- 1Enter the total federal tax you owe.
- 2Enter balances and market values for your accounts, property and vehicles, with any loans against them.
- 3Enter gross monthly household income and allowable monthly expenses.
- 4Choose lump sum or periodic payment — lump sum uses a smaller income multiplier.
- 5Compare the estimated minimum offer with what you owe before preparing Form 656.
Formula and method
Asset equity follows Form 433-A (OIC) Section 3. Bank balances count above the first $1,000. Retirement accounts, real estate, vehicles and other valuables count at quick-sale value — 80% of current market value — minus loans against them. One vehicle (two on a joint offer) gets a further $3,450 allowance, and valuables and personal effects get an $11,980 deduction. No line can be negative.
Remaining monthly income is gross monthly income minus allowable living expenses. Section 8 multiplies it by 12 if you will pay in 5 or fewer payments within 5 months, or by 24 if you will pay over 6 to 24 months. The minimum offer is asset equity plus that future remaining income. The IRS can use different values after review, and the multipliers do not apply if it decides you can pay in full within the collection period.
- Asset equity
- Sum of counted equity in cash, investments, retirement, insurance, property, vehicles and valuables (Box A)
- Income
- Gross monthly household income
- Allowable expenses
- Monthly living expenses allowed under IRS Collection Financial Standards
Worked examples
Wage earner owing $45,000, lump-sum offer
Bank balances count $2,000 after the $1,000 allowance and the $10,000 IRA counts $8,000 at 80%. The car is worth $14,400 at quick-sale value; minus the $6,000 loan and the $3,450 allowance it adds $4,950. Valuables count $4,000, which is under the $11,980 deduction, so equity is $14,950. Adding $300 × 12 of future income gives a minimum offer of $18,550 — about $26,450 less than owed — with $3,710 (20%) sent with the offer.
Same taxpayer paying over 24 months
Choosing periodic payments doubles the income multiplier to 24 months, so future remaining income rises from $3,600 to $7,200. The minimum offer becomes $22,150, paid at about $923 a month over 24 months.
Homeowner with equity who can likely pay in full
A $400,000 home counts $320,000 at quick-sale value; minus the $250,000 mortgage that is $70,000 of equity. Total collection potential of about $88,550 exceeds the $30,000 owed, so an offer would normally be rejected in favour of full payment.
Frequently asked questions
How does the IRS calculate an offer in compromise?+
It estimates your reasonable collection potential: net equity in your assets at quick-sale value plus your future remaining income — monthly income minus allowable expenses — times 12 for a lump-sum offer or 24 for a periodic offer, as laid out on Form 433-A (OIC).
What is the application fee for an offer in compromise?+
The application fee is $205, plus an initial payment: 20% of the offer for a lump-sum offer, or the first monthly payment for a periodic offer. Individuals who meet the low-income certification guidelines do not have to pay either up front.
What is quick-sale value?+
Quick-sale value is what an asset would likely bring in a fast sale, which the IRS form sets at 80% of current market value. Loans against the asset are then subtracted to find the equity counted toward your offer.
Can I offer less than the calculated minimum?+
You can, but you must explain special circumstances such as serious illness or other hardship on Form 656. Otherwise the IRS generally rejects offers below your reasonable collection potential.
Who is not eligible for an offer in compromise?+
You must have filed all required tax returns and made required estimated payments, and you cannot be in an open bankruptcy proceeding. Employers must have made their federal tax deposits for the current quarter and the two preceding quarters before applying.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.