Offer in Compromise: Who Actually Qualifies

The IRS computes RCP as the equity in your assets plus your future income over 12 or 24 months minus allowable living expenses. Your offer must equal or exceed this number.

If you have meaningful home equity, retirement accounts, or steady income above allowable expenses, the formula rarely produces a small settlement. Companies that promise a specific outcome without seeing your finances are selling, not advising.

Low or fixed income with little asset equity. Older taxpayers with no future earning capacity. Recently disabled taxpayers. Situations where collection through normal channels is genuinely doubtful.

Installment agreements — predictable, easier to qualify, no detailed financial disclosure required for amounts under certain thresholds. Currently Not Collectible (CNC) status — pauses collection without settlement. Partial pay installment agreement — pays a portion over time.

Full financial disclosure on Form 433-A or 433-B. Application fee and initial payment. Five years of full tax compliance after acceptance. Defaulting on the terms reinstates the original liability plus penalties.