How to Calculate an IRS Offer in Compromise
You will take the total debt you owe, minus your total assets (reduce your home value by 20%). Now take you monthly available income times the months you have left in the Statute of Limitations (10 years after your assessment date). If this total is less then the total debt you owe to the IRS less your assets, you may qualify for an Offer in Compromise. Your offer amount will be 12 times your monthly available income.
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Available Monthly Income: This is your gross pay less federal tax, state tax and living expenses. There maybe other expenses you may also deduct from your income. However, there are expenses that don’t qualify as expenses by the IRS such as credit card payments and private school tuition. See FreeOfferInCompromise.com for more information acceptable expenses.
Assets (Quick sale value): This would be the cash value of your assets if you were to sell them right now. Think how much they would be worth if you would sell them on Craigslist or at a garage sale.
Home Equity Value: This would be the current value of your house less your mortgage balance. The Calculator will deduct 20% from this amount per the IRS rules.
Total Assets: This is your Assets plus you Home Equity Value less 20%. This value will be used to calculate the offer amount for the IRS.
Total Debt Owed to the IRS: This will be the single assessed tax year amount the IRS is claiming you owe them. If you have multiple assessed amounts from different tax years, use the advanced features below to enter multiple amounts.
IRS Assessed Date: This will be the date the IRS assessed your tax debt.
The Statute of Limitation Expires on X: This adds 10 years to your assessed date. The IRS Statue of Limitations is for 10 years after you debt was assessed by the IRS and you are obligated to pay during this time.
There are X Months Remaining for the Statute: This is the number months remaining until your statute expires. This is used to calculate if your Available Monthly Income is enough to pay off your Total IRS Debt.
Add Additional Debt: If you owe the IRS for multiple tax years, you will need to add the Debt Amounts as well as that IRS Assessed Date
Add Statute Extensions: This is a more complex Offer in Compromise. This would apply if you have gone through bankruptcy, applied for a previous Offer in Compromise or have had a Collection Due Process (CDP).
How many Months from a Previous Offer In Compromise: This would be the number of months for the duration of a previous Offer In compromise, from submission date to rejection.
Bankruptcy: This would be the number of months you were in bankruptcy. The calculator will also add 6 months to the amount per the IRS rules.
Collection Due Process (CDP): This is the number of months you were in a Collection Due Process. This will be added to your Months Remaining for the Statute.
These are the calculations to determine if you qualify for an Offer in Compromise. The calculation takes the Total Debt Owed to the IRS and subtracts your Total Assets. The result is the IRS Debt less Total Assets amount. You multiply your Available Monthly Income times the Months Remaining for the Statute. If this amount is less than the Total Debt Owed to the IRS, congratulations, you may qualify for an Offer in Compromise. The result is 12 times your Available Monthly Income, which is the Recommended Offer Amount.
To determine the Payment Terms for you offer, you will need to give the IRS 20% of your Offer Amount plus an application fee of $186. You can pay the IRS the remaining amount of the offer of up to five payments. Important: You must summit at least a completed 433-A and a 656 form plus the required bank statements, pay stubs, etc.
Make sure you don’t send the IRS any money for an Offer in Compromise without all the forms properly filled out with the appropriate financial documents. Any money you send the IRS without the proper paperwork will not count towards you Offer in Compromise. See FreeOfferInCompromise.com for more details for submitting your offer to the IRS.
For low cost Offer in Compromise assistance go to: IRSexpress.com