Jay Freeborne

by Jay Freeborne, Enrolled Agent

If you want to figure out whether you qualify for an Offer in Compromise to settle your back taxes, here are the basic questions and mathematical formula that will help us figure that out:


Your MONTHLY INCOME (before taxes):

Wages: ______
Spouse's Wages: ______
Business Income (after bus. expenses): _______
Social Security: ______
Pension: ______
Child Support/Alimony: _______
Rental income (minus expenditures): ______



National Standard: _______ This is fixed for food/clothing, etc.
(1 person: $565, 2 people $1029, 3 people: $1227, 4 people: $1450 and $281 for every other)
Housing: ______ Includes all utilities, property taxes, etc. (Each county: has a limitation Housing standard link
Transportation: ______Transportation standards by region for car insurance, gas, etc.
Car payment #1 ______
Car payment #2 ______
Federal, state, social security, medicare taxes: ________
Medical insurance: ________
Out of pocket medical: _______($60 automatic per person - more if necessary)
Life insurance (term only): _________
Daycare: _______
Child support/alimony: ________
Judgements/student loans (for yourself not kids): _______
State back tax - payment plan: _______


Disposable income: ______ multiplied by 12 months = the Offer amount _____ PLUS


IRA/401k: _______
House equity : 80% of value minus mortgages: _________
Any other assets? Boats, or other assets: _______

SO...DISPOSABLE INCOME MULTIPLIED BY 12 MONTHS PLUS YOUR QUICK SALE ASSETS AND THAT'S YOUR OFFER. Is it less than what you owe? Then you might do it. However, if your disposable income will pay the IRS off before the taxes expire - then you don't qualify.

There's a lot more to it -- than this, but use this worksheet as your starting point. You will find our Four Part Series on the IRS Offer in Compromise rule changes starting : Four part series on Offer in Compromise Rule Changes.

Owe the IRS? Want to see if the Offer program will work for you? Email us a description of your tax issue or give us a call at 1-888-282-4697, WATAX.

Registered members of the National Association of Enrolled Agents.

Call and talk with a tax expert for free:
(888) 282-4697

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