Payment Plan vs Offer in Compromise Calculator
Last updated · Reviewed for accuracy against IRS.gov guidance
A payment plan repays the full balance plus 7% interest and a reduced penalty over time. An Offer in Compromise settles for your reasonable collection potential — asset equity plus 12 months of disposable income for a lump-sum offer — but only if that figure is below what you owe and the IRS accepts it.
Estimated total cost over 72 months
Estimated offer range based on reasonable collection potential — not a settlement prediction
Your estimated collection potential ($6,000) is below your balance, so an offer may be worth evaluating. The IRS decides based on documented finances.
Want a specialist to check these numbers against your real IRS account?
Get a free reviewHow the comparison works
The left side estimates the total cost of an installment agreement: the monthly payment that pays off your balance over the term you choose, including interest at 7% and the 0.25% monthly penalty, plus the online setup fee. The right side estimates an Offer in Compromise using the IRS's reasonable collection potential formula for a lump-sum offer: your net asset equity plus 12 months of disposable income, plus the $205 application fee.
If the estimated offer is at or above your balance, the IRS would expect full payment, so the calculator shows the offer as unlikely.
Beyond the numbers
An accepted offer usually costs less, but it's slower and less certain. Offers take months to process, require full financial disclosure, and come with a five-year compliance period. A payment plan is approved quickly — often online for balances up to $50,000 — and stops most collection. Many people start with a plan and pursue an offer only if their finances clearly support one. Read the full comparison in Offer in Compromise vs installment agreement, and check the official IRS Offer in Compromise Pre-Qualifier before applying.
Other options to consider
If you can't afford a full payment plan but don't qualify for an offer, a partial-payment installment agreement pays what you can until the collection statute ends. If you can't pay anything, Currently Not Collectible pauses collection. And penalty abatement can shrink the balance under any of these options.
See which relief programs you may qualify for
Answer 8 quick questions. Free, takes under 60 seconds, and won't affect your credit.
Start the calculatorFrequently asked questions
Is an Offer in Compromise always cheaper than a payment plan?
+
Only when the IRS accepts it — and it accepts offers only when your reasonable collection potential is less than what you owe. For many people a payment plan is the only realistic option.
How long does an Offer in Compromise take?
+
Often 6 to 12 months or more. Collection is generally paused while it's pending, but interest keeps accruing.
What does an offer cost upfront?
+
A $205 application fee plus 20% of a lump-sum offer, or the first monthly payment for a periodic offer, unless you qualify for the low-income waiver.
What if my offer is rejected?
+
You can appeal within 30 days or switch to a payment plan. The application fee and payments made with the offer are generally kept by the IRS.
Does an accepted offer have conditions?
+
Yes. You must file and pay on time for five years after acceptance, or the IRS can reinstate the original balance.
Related
TaxSettlementCalculator.com is not a tax firm, law firm, CPA, or government agency and is not affiliated with the IRS or any state tax agency. Estimates are for educational purposes only and are not tax, legal, or financial advice. Results vary based on individual circumstances, and no outcome is guaranteed. We connect users with independent tax relief professionals.