09/18/2026
Why would the IRS accept $5,000 to settle $100,000 in tax debt? Here's the real reason—and the formula they use to decide.
💰 THE THREE REASONS IRS ACCEPTS OFFERS IN COMPROMISE:
1. REASONABLE COLLECTION POTENTIAL (Most Common)
The IRS calculates what they can realistically collect from you:
• Your assets (equity in property, bank accounts, investments)
• PLUS your future income (monthly disposable income × months remaining on collection statute)
• MINUS allowable expenses (IRS standards, not your actual expenses)
EXAMPLE:
You owe: $80,000
Your assets: $5,000
Disposable income: $500/month
Collection statute remaining: 6 years (72 months)
Your RCP = $5,000 + ($500 × 72) = $41,000
The IRS will accept $41,000 to settle $80,000 because that's all they can realistically collect anyway.
2. BEHAVIORAL COMPLIANCE
When you accept an OIC, you must:
✓ File all tax returns on time for 5 years
✓ Pay all taxes owed for 5 years
If you fail either condition, your OIC defaults and you owe the original debt again. This ensures future compliance—which is valuable to the IRS.
3. COST-BENEFIT MATH (The Real Reason) The IRS runs the numbers:
Accept $41K now OR spend years chasing $80K through:
• Wage levies (people quit jobs to avoid)
• Bank levies (people pull money out)
• Asset seizures (expensive to track and execute)
A dollar collected via OIC is more valuable than a dollar collected through enforcement. When they send levy notices:
• Some people quit their jobs
• Some pull all money from banks
• Some hide assets
All that tracking costs time, resources, and money.
THE IRS MATH:
$41,000 guaranteed now or $80,000 maybe later after expensive collection efforts
⚠️ THE BIGGEST MISTAKE:
People think the IRS accepts any lowball offer because they're struggling financially.
WRONG.
The IRS calculates your RCP down to the dollar. If you offer $10K but your RCP is $30K, they reject it instantly—and you've wasted months waiting for an answer. You need to know YOUR number before filing an offer.
🎯 THE FORMULA ISN'T NEGOTIABLE:
The IRS uses Form 433-A (individuals) or 433-B (businesses) to calculate your exact RCP.
They look at:
• Bank account balances
• Investment accounts
• Real estate equity
• Vehicle equity
• Monthly income
• Monthly allowable expenses (IRS standards, not your actual spending)
Your offer must meet or exceed this calculated amount, or it gets rejected.
📊 WHAT HAPPENS WHEN YOU GUESS WRONG:
• Application fee: $205 (non-refundable)
• Initial payment: 20% of offer amount (non-refundable if rejected)
• Processing time: 6-24 months
• During processing: Collection activity pauses (but interest keeps accruing)
• If rejected: You're back where you started, but now owe MORE due to accumulated interest
This is why professional calculation matters.
Drowning in tax debt? Think an Offer in Compromise might work for you?
📞 1-877-LEVY-KING (1-877-538-9546)
🌐 www.levyking.com
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