- 16 - IRM pt. 5.8 provides guidelines for offers in compromise. In evaluating an OIC, the IRS estimates the taxpayer’s reasonable collection potential (RCP). The RCP is calculated by determining, then adding together: (1) The taxpayer’s “net realizable equity”; i.e., quick sale value less amounts owed to secured lien holders with priority over Federal tax liens; and (2) the taxpayer’s “future income”; i.e., the amount collectible from his expected future gross income after allowing for necessary living expenses. IRM secs. 5.8.5.3.1, 5.8.5.5 (2005). “Generally, the amount to be collected from future income is calculated by taking the projected gross monthly income less allowable expenses and multiplying the difference times the number of months remaining on the statutory period for collection.” IRM pt. 5.8.5.5.5.1 (2005). In a compromise, the Government will not collect the full amount of the tax. As a result, the conditional expenses rules for an OIC differ from the rules for installment agreements. IRM pt. 5.8.5.5.3.1 (2005). With respect to conditional expenses, such as credit card payments, “although the payment may be allowed in an installment agreement where the tax will be paid in full, it [the conditional expense] will not be allowed for computation of an acceptable offer amount because the Federal 7(...continued) ($1,661). See Table 3, supra p. 6.Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 NextLast modified: March 27, 2008