How Much Will the IRS Settle For?
Quick Answer
The IRS calculates settlement offers based on your Reasonable Collection Potential (RCP): your assets plus future income over the collection period. In 2023, the average accepted offer settled for about 31 cents on the dollar.
Detailed Explanation
The IRS uses a specific formula to determine the minimum amount they'll accept in an Offer in Compromise. Your Reasonable Collection Potential (RCP) equals your net realizable equity in assets (what your assets could sell for minus debts) plus your future income (monthly disposable income multiplied by a factor based on payment terms). The IRS won't accept less than your RCP unless there's doubt about the liability or special circumstances. Factors that can reduce your offer include low income, high allowable expenses, minimal assets, health issues, and age.
Key Points to Remember
- Settlement amount based on Reasonable Collection Potential (RCP)
- RCP = asset equity + future income calculation
- Average accepted offer is about 31% of total owed
- Lump sum offers use 12-month income multiplier
- Periodic payment offers use 24-month income multiplier
Timeline
6-12 months for OIC decision
Related Resolution Options
Related IRS Notices
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