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.
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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.
