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Internal Revenue Code Simplified
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Home FAQ on Tax Issues

Offer in Compromise Calculator With 3 Tips

by Prashant Thakur
October 21, 2022
in FAQ on Tax Issues
0
offer in compromise calculator

Offer in compromise calculator does math about the tax debt settlement amount. This math or computation about the offered amount that IRS may likely accept is a very important exercise. So once you are prima facie eligible for offer in compromise program of the IRS, you need to submit an offer application. This calculator will be useful at that moment.

Table of Contents

  • Offer in Compromise Calculator
  • Basis for offer in compromise calculator
  • 2 Options Offer in Compromise
  • Formula to find out offer amount under 2 Options in Offer in Compromise
  • 24 months repayment
  • 3 Tips to get an Offer in Compromise approved

Offer in Compromise Calculator

Basis for offer in compromise calculator

It is common knowledge that IRS settles the tax debt for an amount computed on the basis of your money and assets available to pay your tax debt, and in IRS calculation, that amount is less than your IRS debts.

So, the calculator asks for all your monthly income, which you may find by aggregating income listed  IRS Form 433-A, Section 5: Monthly Income and Expenses. Some of the income out of that list are :

  • Wages or/and business/professional income
  • Retirement account distribution
  • Social Security payments
  • Alimony
  • Child support

From the aggregate of monthly income, you need to reduce monthly expense like :

  • Food, clothing, and misc.
  • Housing and utilities
  • Car payments and maintenance costs
  • Out-of-pocket medical coverage
  • Childcare
  • Current year income taxes

2 Options Offer in Compromise

The IRS offers 2 repayment options for an accepted Offer in Compromise:

  • 5-month repayment, also called “lump sum.”
  • 24-month repayment

Formula to find out offer amount under 2 Options in Offer in Compromise

5-month repayment

Under 5-month repayment, also called “lump sum.”, the formula is that payments have to be made.

Net monthly Income = Aggregate Monthly income – Monthly Expense

The Offered amount is =Net Monthly Income x 12 + Value of Personal Assets

With the application, you must pay 20% of the offered amount and the balance in 5 equal instalments starting the month IRS approves your 5-month offer in compromise.

24 months repayment

3 Tips to get an Offer in Compromise approved

The Offer in Compromise calculator helps you find an estimated offer amount. However, it is noteworthy that there are three unique requirements that must be met for the IRS to even consider accepting the request for the Offer of Compromise. So, read the preliminary 10 deciders for offer-in compromise offer and give attention to the following three tips that may help your OIC application succeed.

#1 Doubt as to Liability

The concept of Doubt as to Liability simply means that you create a genuine doubt in the mind of the IRS (legally and factually , of course) that the tax liability shown against your name may not be correct or does not exist or is legally not very sound. This doubt as liability may compel the IRS to settle for a lower amount to encourage the taxpayer to be able to pay some amount of money.

In order to build a Doubt as a Liability, you must seek help from a tax attorney or CPAs specialising in tax matters. They can go into various issues concerning the tax debt against you and can present before IRS a good ground for Doubt as to Liabilities,

#2 Doubt as to collectability 

The offer in compromise calculator can very well provide a realistic estimate and likelihood of collection of tax liability for the IRS. For this purpose, you must present before IRS factual and correct data about the income, assets and expenditures by filing Forms Form 433-A (OIC) or Form 433-B (OIC).

The IRS determines your ability to repay at all sources of income that is being reported and subtracts any expenses that it deems acceptable. If they are convinced that it is highly unlikely that the taxpayer would be able to come up with the full amount.

#3 Payment of the full amount presents a significant hardship 

Show and convince the IRS that paying the tax debt in full will cause severe financial hardship that affects even the basic things in carrying a normal life. IRS may start renegotiating a lower amount of money to make it less financial hardship for the taxpayer.

After analyzing all of the information included on the information statement filed by you as part of the OIC application, IRS may also consider and apply the public policy that it deems worthy enough to enter into an Offer of Compromise.

Post Disclaimer

While the information on this site  - Internal Revenue Code Simplified-is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, we make no warranty or guarantee of the accuracy or reliability of information contained herein.

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  • Tax Rates 2023
    • Pension Plans Limits 2023
    • Estate & Trust
    • 2022 Tax Brackets
      • USA State and Local Taxes
      • EIC Table 2023, 2022
    • Tax Bracket 2021
    • Tax Brackets 2020
    • Tax Bracket 2019
      • Long Term Capital Gains Rate- 2019,2018,2017
      • 2019 & 2018 Standard Deduction
      • Kiddie Tax Brackets
    • Depreciation MACRS Table
  • Tax Information
    • Latest Phone number of IRS
    • Local Taxpayer Advocate Service Office
    • Search CAA & AA
  • Tax Calculator 2022 & 2023
    • Fastest Sales Tax Reverse Calculator
    •  EITC Calculator 2022 & 2023
    • SEP-IRA Calculator
    • Penalty Calculator
    • IRA Contribution Limit Calculator
    • Mileage Reimbursement Calculator
    • Net Investment Calculator
    • Alternative Minimum Tax Calculator for 2017 & 2018
    • Estimated Tax Penalty
    • Section 179 Deduction
    • tax residency
      • Physical Presence Test Calculator
      • US Tax Residency Calculator
      • First Year Choice Calculator
    • Capital Gains Calculator
    • Home Office Deduction Calculator
  • Write to me
  • Q&A
  • State and Local Taxes
    • California Tax Calculator With Tax Rates
    • DC Tax Rates 2022 & Past Years
    • Massachusetts tax calculator
    • Illinois tax calculator with tax rates
    • Indiana Tax Rate Chart
    • NY State Tax Rate 2022
  • Privacy Policy
  • Guest Posting
  • Lottery Tax Rates by State
  • Test of calculator
  • Quick Videos of Tax Tips!

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