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Offer in Compromise Calculator
By Priya Raman, Contributing Writer, Policy & RegulationEstimate an IRS Offer in Compromise, your reasonable collection potential from disposable income and asset equity.
By Priya Raman, Contributing Writer, Policy & RegulationEstimate an IRS Offer in Compromise, your reasonable collection potential from disposable income and asset equity.
Start with a household bringing in $4,500 a month against $3,800 in IRS-allowed living expenses. That leaves $700 of monthly disposable income. For a lump sum offer, the IRS multiplies that by 12, giving a future income value of $8,400. Add $6,000 in net asset equity, a car with some equity and a modest savings balance, and the reasonable collection potential lands at $14,400. That figure, not the size of the original tax bill, is roughly what the IRS would expect as a minimum offer. Switch to a periodic payment plan instead of a lump sum and the multiplier jumps to 24 months, pushing the future income value to $16,800 and the total estimated offer to $22,800, which is why most applicants who can scrape together the cash prefer the lump sum route.
Educational estimate of reasonable collection potential. It is not an IRS determination.
The IRS bases an OIC on your "reasonable collection potential," not on the size of your original tax bill. It takes your monthly disposable income, income minus allowed living expenses, and multiplies it by 12 for a lump sum offer or 24 for a periodic-payment offer. Then it adds the net equity in whatever you own: bank balances, vehicles, real estate, retirement accounts. The sum is roughly the floor for an offer the IRS will consider.
Two things trip people up. First, "allowed living expenses" are the IRS's own standards for housing, transportation, food, and health care in your area, not your actual budget, so your real monthly spending may be higher than what the formula counts. Second, the lump sum multiplier is half the periodic one, which is why applicants who can raise the cash for a lump sum almost always land on a lower offer than someone paying over 6 to 24 months.
The multipliers and fee below come directly from the IRS Form 656 Booklet and the IRS Offer in Compromise page, the same sources behind this calculator's math.
| Figure | Value | Source |
|---|---|---|
| Lump sum offer multiplier | Disposable income x12 | IRS Form 656 Booklet |
| Periodic payment offer multiplier | Disposable income x24 | IRS Form 656 Booklet |
| Application fee | $205, waived if low-income | IRS.gov |
For the full set of 2026 figures this site's tools are built on, see the tax relief programs reference.
An Offer in Compromise lets you settle IRS debt for less than you owe, but only if you can show the IRS that the lower amount is the most it could realistically collect. The formula is your reasonable collection potential: monthly disposable income (income minus allowed living expenses) times 12 or 24, plus the equity in your assets. If your offer meets or exceeds that figure, it has a chance. If your income or assets indicate the IRS could collect more, the offer will be rejected. This tool estimates the figure before you apply.
It compares your offer to your reasonable collection potential, future disposable income plus the equity in what you own. An offer that meets or beats that number has a real shot; one that falls short generally gets rejected.
Because the lump sum path multiplies disposable income by 12 months while the periodic path multiplies it by 24, so the same monthly income produces a much smaller offer if you can pay it off in five payments or fewer.
Not automatically. This estimates the floor the IRS math would suggest, but many offers are still rejected on documentation, asset valuation, or compliance grounds even when the arithmetic checks out.
No. Use the free IRS OIC Pre-Qualifier Tool and Form 656 for an actual application; this calculator is a planning estimate to run before you get that far.