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The core formulas
Two formulas control the minimum offer. Periodic-payment offer (paid over 6–24 months): available asset equity + 24 × remaining monthly income. Lump-sum offer (paid in 5 or fewer installments within 5 months of acceptance): available asset equity + 12 × remaining monthly income. The 24-month rule does not mean the IRS takes 24 months of gross pay — it multiplies what remains after recognized household expenses. If remaining monthly income is negative, the future-income component is treated as zero (a negative number does not reduce asset equity).
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Step 1 — Total monthly household income
Form 433-A (OIC) begins with average gross monthly household income: wages, Social Security, pensions, unemployment, interest and dividends, rental income, net business income, partnership or S-corporation distributions, child support or alimony received, gig and digital-platform income, recurring capital gains, and contributions from a spouse or other household member who helps pay expenses. The analysis may include income that is not taxable or does not appear on the taxpayer's return. A non-liable spouse's income can be considered to determine the taxpayer's fair share of household expenses, even when that spouse does not owe the tax. For self-employed taxpayers, noncash deductions such as depreciation are ordinarily added back because they do not represent cash leaving the household.
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Step 2 — Allowable monthly living expenses
The IRS does not automatically subtract everything you actually spend. It applies the National Standards (food, clothing, housekeeping, personal care, miscellaneous — ordinarily allowed by household size without receipt-by-receipt proof) and the Local Standards (housing/utilities and transportation — generally limited to the lesser of actual or standard, with documented deviations possible when the standard would not cover basic living needs). Other allowable categories include health-insurance premiums, out-of-pocket medical, court-ordered payments, necessary child or dependent care, certain life-insurance premiums, current federal/state/local taxes, certain delinquent state or local tax payments, government-guaranteed student loans, employer-required retirement contributions or union dues, and other necessary secured debts. Private-school tuition, college costs, charitable contributions, voluntary retirement contributions, and payments on most unsecured debts generally do not reduce available income absent exceptional circumstances.
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Step 3 — Remaining monthly income (Box F)
Total household income (Box D) − allowable household expenses (Box E) = remaining monthly income (Box F). Example: $6,800 − $6,300 = $500. Future-income component: lump-sum $500 × 12 = $6,000; periodic $500 × 24 = $12,000. The lump-sum option generally produces a lower calculated offer because it uses only 12 months of remaining income in exchange for faster payment.
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Step 4 — Available (net realizable) equity in assets
Form 433-A (OIC) uses net realizable equity, not ordinary paper equity. Bank accounts: current form starts with total balances in cash, checking, savings, money-market, CDs, online, and stored-value accounts, then subtracts a form-specific bank allowance (the April 2026 revision applies a $1,000 individual allowance). Investments and digital assets (stocks, bonds, mutual funds, brokerage, crypto, stablecoins, NFTs): reported at current value less qualifying loans; they do not automatically receive the 20% quick-sale reduction. Retirement accounts: generally 80% of market value less qualifying loans, with room for greater reduction where liquidation triggers income tax or early-withdrawal penalties. Real estate: current market value × 80% − mortgage and other qualifying secured debt (a $300,000 home with $225,000 mortgage yields $15,000 available equity, not the $75,000 paper figure). Vehicles: market value × 80% − loan balance − vehicle allowance (April 2026 form: $3,450 for the first qualifying vehicle, with a possible second allowance on a joint offer). Life insurance: permanent policies at current cash value less policy loans; term policies typically have no cash value. Valuable personal property, business cash, receivables, equipment, inventory, and ownership interests must be disclosed and valued under current form rules; in some cases the IRS may exclude equity in necessary income-producing assets other than real estate when liquidation would destroy the ability to pay the offer.
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Step 5 — Add asset equity to future income
Worked example. Household income $8,100; allowable expenses $7,400; remaining monthly income $700. Assets: bank $3,000 (after allowance) + real-estate $10,000 (after 80% and mortgage) + vehicle $950 (after 80%, loan, and vehicle allowance) = $13,950 available equity. Periodic offer: ($700 × 24) + $13,950 = $16,800 + $13,950 = $30,750. Lump-sum offer: ($700 × 12) + $13,950 = $8,400 + $13,950 = $22,350. The lump-sum is $8,400 lower but requires 20% ($4,470) with the application and the $17,880 balance within the accepted five-month period (unless the low-income certification applies). A periodic offer of $30,750 spread over 24 months implies ~$1,281/month — well above the $700 surplus — so the taxpayer must document how the equity portion will be funded (asset sale, refinance, loan, larger initial payment, family contribution, or other documented source).
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When the IRS recalculates or the multipliers do not control
The taxpayer's calculation is a proposal. The IRS may raise the offer amount when it concludes income was understated, household contributions were omitted, an expense is unnecessary or exceeds the applicable standard, an asset was undervalued or a loan is not a valid secured encumbrance, income is expected to increase, or an asset was transferred or dissipated. If the IRS calculates a higher amount, it will ordinarily allow the taxpayer to amend the offer; if not, and absent special circumstances, the offer may be rejected. The 12- and 24-month multipliers do not apply when the IRS determines the liability can be paid in full within the collection statute — an installment agreement or full-pay may be more appropriate. Taxpayers may also offer less than the calculated minimum when documented special circumstances establish that paying the calculated amount would create economic hardship or would be inequitable. Finally, remember that "24 months" describes three separate rules: the income multiplier for periodic offers, the 6–24-month periodic payment window, and the two-year IRS decision period (with statutory exclusions and suspensions) after which an unrejected offer can be deemed accepted.
