The IRS doesn’t pick a settlement number out of thin air. They use a formula called Reasonable Collection Potential (RCP), and they generally won’t accept an Offer in Compromise for less than that number.
This calculator runs the same formula. It’s the actual math an Offer Specialist uses when they review Form 656.
Offer in Compromise Estimator
All values monthly unless noted. Leave blank if zero.
Monthly cash flow
Assets (current value)
Tax debt
Educational estimate only. The IRS makes the final determination based on Form 433-A(OIC) or 433-B(OIC), national and local expense standards, and Offer Specialist review. Most submitted offers are rejected. We are not a tax preparer, attorney, or enrolled agent.
How the Reasonable Collection Potential formula works
The IRS calculates RCP as:
RCP = Net Realizable Equity in Assets + (Future Monthly Income × multiplier)
Net Realizable Equity (NRE) is the “quick-sale value” of each asset (usually 80% of fair market value) minus any secured debt against it. The IRS assumes a forced-sale discount because they’re calculating what they could collect in a hurry.
Future Monthly Income (FMI), sometimes called Remaining Monthly Income, is your monthly income minus allowable monthly expenses. Allowable expenses use IRS Collection Financial Standards — not what you actually spend.
The multiplier is:
- 12 for a lump-sum cash offer (paid within 5 months of acceptance)
- 24 for a periodic payment offer (paid over 6–24 months)
A lump-sum offer is usually cheaper because the multiplier is half. But you need the cash to make it work.
What the calculator can’t see
This calculator does not know:
- Whether your reported expenses exceed IRS Collection Financial Standards (they cap how much housing, food, and transportation you’re “allowed” — see IRS Collection Financial Standards).
- Whether you have dissipated assets the IRS will add back (recent gifts, transfers to family, large unexplained withdrawals).
- Whether you owe self-employment taxes that disqualify you from streamlined offers.
- Whether you have unfiled returns. You must be current on all returns to submit an offer.
For these reasons, an experienced tax pro’s estimate will usually beat this calculator’s number — in either direction.
After you have a number
If your RCP is less than your tax debt, an Offer in Compromise is theoretically possible. About 1 in 3 submitted offers is accepted. The big drivers of rejection are:
- Reporting expenses above IRS standards (the IRS cuts them down)
- Unfiled tax returns
- Recent asset transfers or gifts to family
- Self-employment with poor recordkeeping
If your RCP is greater than your tax debt, OIC is not your path. An installment agreement, a partial-pay installment agreement, or currently-not-collectible status will be cheaper and faster. Use our Installment Agreement Calculator next.
Free help that doesn’t cost anything
- IRS Offer in Compromise pre-qualifier — official IRS tool
- Low Income Taxpayer Clinics (LITCs) — free representation if you qualify by income
- Taxpayer Advocate Service — independent IRS office, free
If you do hire a firm, see our reviews and our best tax relief companies guide before committing.