The IRS calculates your settlement amount based on your assets and your future ability to pay. If you qualify for an OCI, the IRS will then determine how much it will accept from you to pay off the debt. The amount of this offer is also called reasonable collection potential (RCP). This is the amount the IRS can reasonably charge you before the collection law expires.
It is a federal program that allows you to pay off your tax debt for less than the full amount you owe. Most people think that the IRS is haggling with taxpayers about how much it will take to settle the tax bill. Debt consolidation and liquidation are two terms that are often linked together, but they are two completely different ways of managing debt. If you're looking to settle your IRS tax debts, make sure you're choosing the right option for your financial situation.
However, in real life, it's not that easy to get the IRS to settle a tax debt for cents on the dollar. The Commitment Offer Program is a way to settle federal tax debt, but the IRS must first accept your offer. This amount is called the offer amount and represents an estimate of how much the IRS will accept to settle a tax bill. You can absolutely pay off your tax debts directly with the IRS, although it often requires a lot of forms (and documentation) and is often a complicated process.
A transaction offer (OIC) is an agreement between a taxpayer and the IRS that settles the taxpayer's tax liabilities for less than the total amount owed. There are many IRS debt settlement options to choose from, including some that reduce the total balance due.