Worksheets
Tool 5: Offer in Compromise Reality Check
Use an Offer in Compromise worksheet to review finances and practical eligibility questions before spending time or money on a settlement proposal.
Book by Justus D Eapen · The IRS Is Not the End of the World · professional review pendingThis page’s Source Notes and review status1 min read
Review status: book guide, pending professional review. This text has not yet been reviewed by an enrolled agent, CPA, or attorney. It is general education, not advice for your situation. Figures, forms, and thresholds change; verify them on IRS.gov.
Before you pay a fee or a professional, confirm each of these.
- All required returns for the last six years are filed
- I am current on this year's withholding or estimated payments, if the current rules require it
- I am not in an open bankruptcy
- I have computed net realizable equity using the 80% rule and the exclusions on the current form
- I have computed disposable income using the Collection Financial Standards, not my actual expenses
- Lump sum potential = equity + (12 times disposable income). Periodic potential = equity + (24 times disposable income)
- My offer potential is meaningfully below my total debt
- If lump sum, I can actually pay 20% with the application and the rest within five months of acceptance
- If periodic, I can make every monthly payment during the months or year the IRS takes to decide
- I have not sold, given away, or spent assets in the last few years that the IRS could add back as dissipated
- I understand a rejected offer extends the collection statute by the time it was pending plus 30 days
- I understand I must file and pay on time for five years after acceptance or the offer defaults
- I have run the IRS pre-qualifier tool and it did not rule me out
- If my potential exceeds the debt but I am elderly, ill, or my only asset is a home I cannot borrow against, I have considered an effective tax administration offer with a documented narrative