The formula
For a doubt-as-to-collectibility offer, the IRS compares the offer with the taxpayer's reasonable collection potential (RCP): the net realizable equity in assets plus the amount it could collect from future income. Form 656-B (Rev. 4-2026) builds the minimum offer the same way on Form 433-A (OIC): add the available equity in assets (Box A, and Box B for business assets of the self-employed) to remaining monthly income times a multiplier. The booklet's own words: “If you will pay your offer in 5 or fewer payments within 5 months or less, multiply "Remaining Monthly Income" (Box F) by 12”; for an offer paid in 6 to 24 months, multiply by 24.
Assets. IRM 5.8.5.4.1 values assets at net realizable equity, quick-sale value less secured debts with priority over the federal tax lien, and says “Normally, QSV is calculated at 80 percent of FMV.” Form 433-A (OIC) applies that 80% to retirement accounts, real estate, vehicles, valuables and furniture, and then subtracts fixed allowances: $1,000 from bank accounts (line 1), $3,450 from each vehicle (line 6; the second only on a joint offer), and $11,980 from the valuables and personal effects total (line 7). Investment accounts and life insurance cash value go in at current value less loans. No line goes below zero. You can change the quick-sale percentage, because the IRM lets the IRS use a higher or lower figure when market conditions support it.
Future income. IRM 5.8.5.25 defines future income as projected gross monthly income less allowable expenses, times the months that match the payment terms: 12 for a lump sum offer, 24 for a periodic offer. When fewer months remain on the collection statute for every period in the offer, the IRM uses the months remaining instead; enter the earliest CSED to apply that. Allowable expenses follow the collection financial standards.
The multipliers do not apply in every case: the booklet notes they “do not apply if the IRS determines you have the ability to pay your tax debt in full within the legal period to collect.” If the RCP is at or above what is owed, the balance is collectible and a doubt-as-to-collectibility offer is not the right tool; an installment agreement or partial payment agreement may be.
Checked against the IRM
IRM Exhibit 5.8.5-2 works a periodic payment offer: $30,000 of equity in assets and $300 a month of future income. Entered as $30,000 of bank balances above the $1,000 allowance and $300 of remaining monthly income on the periodic option, the calculator returns $37,200, the IRM's reasonable collection potential. The vehicle and furniture allowances were checked line by line against the Form 433-A (OIC) instructions.
Filing the offer
An offer goes in on Form 656 with Form 433-A (OIC) or 433-B (OIC), the $205 application fee, and the initial payment: 20% of the offer for a lump sum offer, or the first monthly payment for a periodic offer, unless the low-income certification applies. See the Form 656 guide, the reasonable collection potential guide and the offer checklist. While an offer is pending, levy is barred and the collection statute is suspended (IRC 6331(k)(1) and (3); IRM 5.1.19.3.4); the statute date calculator handles that period.
Questions practitioners ask
Why does the IRS use 80% of market value?
IRM 5.8.5.4.1 values assets at quick-sale value, the price a seller could get when the asset must be sold quickly, and says it is normally 80 percent of fair market value. The IRS can use a different percentage, or full value, when the market supports it.
Does a lump sum offer always use 12 months of income?
Generally yes, under Form 656-B and IRM 5.8.5.25. If fewer than 12 months remain on the collection statute for all the periods in the offer, the IRS uses the months remaining.
Is retirement money counted?
Yes. Form 433-A (OIC) counts retirement accounts at 80% of current value less loans, and notes the reduction may be greater because of taxes and early-withdrawal penalties.
What has to be paid with the offer?
The $205 application fee and the initial payment: 20% of the offer amount for a lump sum offer, or the first proposed monthly payment for a periodic offer, with the remaining periodic payments made while the IRS considers the offer. Neither is required if the taxpayer meets the Low-Income Certification guidelines in Form 656-B.