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Are 401K contributions allowed as a future expense for the RCP calculation?
PostedNovember 17, 2025
UpdatedNovember 17, 2025
ByKlemens Raab
No, contributions to retirement accounts or other savings vehicles (like whole life insurance that builds cash value) are not allowed as an expense while the taxpayer owes back taxes.
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Offers-in-Compromise
- Do you charge for consultations, and if so what do you provide to justify that consult fee?
- I am a newly enrolled agent (EA) and would like to go into practice on my own. Is an EA designation enough? Or do I need to get another license and become a CPA?
- Do you think it is a conflict of interest for a CPA who is handling a taxpayer's resolution to also prepare & sign the taxpayer's prior delinquent tax returns?
- Can you charge for the offer based upon a percentage of what you will save the taxpayer?
- What do you do if the client expects me to do this work as part of their tax preparation?
- Can you set up a client with a monthly payment plan for your fees? Is that a violation of circular 230?
- What are the criteria for being accepted into the Offer-In-Compromise program?
- If you are filing a bunch of missing tax returns, should I mail them all together or mail some and e-file the last three years that are eligible for e-filing?
- If the taxpayers were non-filers and now suddenly file their tax returns as married filing separately, does that raise a red flag with the IRS?
- Does it make sense to amend the tax returns to become married-filing-separate and prevent the spouse from being responsible for the debt?
- If the IRS filed Substitute-for-Returns on my client, do I need to file the actual returns before submitting an Offer?
- I have a client that has not filed for the last 10 years. How many returns should I file?
- How do you file the state tax return first, because if you e-file they go in together?
- When filing delinquent returns when you want to file an offer-in-compromise, do you send the returns with the OIC, do you file the returns with the RO, do you file at the address in the 1040 instructions, or do you do all 3?
- If someone is uncollectible then they are not required to be in tax compliance. If my taxpayer is uncollectible, can they file an offer even if all of their tax returns are not filed?
- Are estimated tax payments still required if the self-employed person had a loss the year before?
- Do you have to show estimated tax payments of a certain level for a self-employed person?
- How are estimated tax payments determined?
- If I need to file an Offer in the second half of the year, can I make up estimated tax payments even if they are late or do I need to wait until next year to file the Offer?
- If I am sending in several estimated tax payments for my client to get into compliance, must I make separate payments or can I lump them together and send one payment to cover 3 quarters?
- The IRS says my client must be in tax compliance, but what does that mean?
- How long does the IRS have to collect a tax?
- When does the Collection Statute begin to run?
- What is the difference between a "lump-sum" offer and a "short-term deferred" offer?
- What is an "Effective Tax Administration," or ETA Offer?
- How do you complete Form 2848 when you are not sure what years are filed or not filed?
- What is a Doubt as to Liability offer?
- What is the "low-income certification" for purposes of filing an Offer?
- Can you ever get more than 24 months for a deferred Offer?
- What if only one spouse owes the tax?
- Can one spouse file an Offer on a joint tax liability if the other does not want to participate?
- How do you determine if the taxpayer can full-pay if they have multiple Collection Statute Expiration Dates ("CSED's")?
- How hard is it to get an offer with the IRS?
- What forms must be filled out to file an Offer-in-Compromise?
- How much does it cost to apply?
- Can you default and void an Offer-in-Compromise?
- What is the minimum you can offer?
- How much does it cost to submit an Offer-In-Compromise?
- The IRS does not compromise on payroll taxes, correct?
- Does the IRS consider a potential bankruptcy filing by the taxpayer in determining whether to accept the taxpayer's Offer-in-Compromise?
- If my client's income is currently down, is now the best time to file an Offer?
- How does the IRS treat the business assets for purposes of the Offer?
- If a taxpayer has died can they still file an Offer-in-Compromise?
- Does making installment agreement payments keep the collection statute open?
- I have a client on an installment agreement. Can they file an Offer?
- What is the impact of the Community Property Laws on a taxpayer's Offer?
- I have a married couple that owe taxes independently from before marriage and now owe for the last several years together. Can we do this as one Offer?
- My client owes for 9 years of taxes. Can he compromise on the earliest five and then do a payment plan on the most recent four years?
- Would you ever consider bankruptcy as a better option to solve a tax issue?
- Can an offer be filed if the client is in bankruptcy?
- The IRS says my client, who has lived in Italy for the last 15 years, still owes the taxes they owed when they moved to Italy. We have been fighting with them because the ten-year Collection Statute has expired. Do you have any advice?
- What if we file an Offer and the IRS calculates a higher RCP amount?
- Is RCP calculated on a monthly or annual basis?
- Does my client have to include their retirement accounts in their RCP analysis?
- On your podcast you mention strategies to adjust an RCP calculation. Can you elaborate?
- Are credit card payments an allowable expense for the Offer RCP calculation?
- Are 401K contributions allowed as a future expense for the RCP calculation?
- What is the RCP calculation?
- What about someone who is older and will be retiring in two years. Will the IRS factor that in when figuring RCP?
- What if the Taxpayer cannot access the equity in their assets? Can it be excluded from the Offer calculation?
- I have an elderly client with no future income. They owe $86,000 but have $900,000 of equity in their home. Can I explain to the IRS that they cannot get a mortgage, so the IRS should ignore the equity in the home and accept an Offer?
- What if only one spouse owes the back tax debt, the spouses live in a community property state but have real estate in a separate property state?
- If a client pulls equity out of their house before the tax returns are assessed and pays off their credit cards, will the IRS look at that as fraud?
- If a taxpayer takes a loan against their assets for the Offer, like a home equity line or a 401(k) loan, can they deduct the loan repayment against their future income?
- Is money in a 529 account includible as an asset for an Offer?
- I have a client that suggested he could make his cash in the bank disappear. Is it okay or would the IRS suspect something?
- The Offer Specialist we are dealing with is adding in the PPP Loan Forgiveness as an asset for purposes of their Offer. Is this correct?
- My client has an EIDL loan from the federal government and the IRS claims they can take the amount available and use it to pay their debt, and so are including it in their Offer calculation. My understanding is that the IRS does not require you to take loans to pay them. Can you confirm this, and what should I respond with?
- Can you adjust a taxpayer's withholding to reduce their income and help them get their Offer accepted?
- The IRS is forcing my client to include the child support payments as income, why?
- What if the client's income swings up and down so there is no clear picture of their normal level of income?
- If the IRS averages the taxpayer's income over the last 3 years, do they use that for the RCP calculation instead of their current income?
- I have a taxpayer that received phantom income from a pass through but no cash. Does this income have to be included?
- What if the client has a W-2 but not enough withholding?
- Do I use 12 months of future income for a lump sum offer or the 80 months remaining on the CSED?
- The IRS is adding my client's EIDL loan in as future income from his business. Wont the IRS have to allow an offsetting expense for the repayment of the loan back to the federal government?
- The taxpayer has two vehicles in their name: their own, which is leased, and their college age child's, which has no payment. IRS will not allow the taxpayer's car payment. Why?
- My client pays for after-school care for their two children. Is this allowed?
- If an expense is not allowed for the Offer does that mean the taxpayer cannot pay the expense?
- Are college tuition payments for the taxpayer's children allowed as an expense for an Offer-in-Compromise if they are REQUIRED under the divorce decree?
- My client donates to charity every year. Is this an allowable expense?
- If spouses are separated and both have housing expenses can they claim both of their housing expenses for calculating their Offer?
- Can the taxpayer get both auto expense and public transportation as deductions when calculating future income for their Offer?
- How often does the IRS update its expense standards for Offers?
- Can the taxpayer challenge the IRS expense standards as being abusive because they are so limiting?
- How do you know what the standards for expenses are if the taxpayer lives in a foreign country?
- Can I claim childcare expenses if the stay-at-home spouse is disabled?
- For the car payment limits, what if one spouse's car payment is higher than the allowable standard and the other spouse's car payment is lower than the standard? Can you average them or add them together?
- Can you claim medical deductions for a taxpayer's mother?
- How can the professional representative become a "future expense" and have our fees factored into the Offer?
- What do you do with clients that pay for everything in cash and cannot prove their expenses?
- What is included in the housing expense?
- My client has multiple Schedule C businesses, some of which lose money. The IRS is only using the positive income businesses and ignoring the losses from the others. Is this accurate?
- How many months of bank account statements should we include with the Offer package?
- Who should the checks be made out to and what should be written on the memo line?
- Should I include a cover letter with my Offer package?
- Do I file the Offer with the Revenue Officer, or should I mail it into the Centralized Offer Unit listed in the instructions?
- What are the differences between the types of Offers-in-Compromise?
- How do you know if you should file a Lump-Sum Offer or a Periodic Deferred Offer?
- If we submit a Periodic Offer, do we have to pay it evenly over the twenty-four months?
- If your client qualifies for an ETA Offer, how do you determine how much to Offer?
- For a Doubt-as-to-Collectibility Offer with Special Circumstances, how do you decide which expenses to argue for a departure from the standards?
- I have a client that filed an Offer, and the Offer unit closed their file and returned it because they had an audit adjustment on a tax year come out. Can they do that?
- What are your options if there was an offer in compromise that was returned due to noncompliance?
- My client has a schedule C business, and the Offer Specialist at the IRS won't allow the car payment for their Offer because they are using it in the business. Do you agree?
- When you appeal the denied offer do you go to Tax Court? Can an accountant still represent the taxpayer at Appeals?
- If you file a deferred Offer, and the offer is rejected, do you still need to make periodic payments while you wait for your Appeals hearing?
- If the client's financial situation changes after the Offer is accepted, can it be renegotiated?
- If Appeals only looks at the OIC as filed, what happens if circumstances have changed for the worse since the OIC was filed? Can the Offer be reduced?
- How is an Offer computation and future payments effected by divorce?
- How long does the IRS have to respond to an offer in compromise?
- Can the IRS file a lien after an offer is submitted?
- Where will the payments be applied?
- Appeals accepted the Offer but wants my client to waive their tax court rights. Should we agree to sign it?
- What if the IRS calculates a higher amount than the amount my client offered? Is the Offer dead?
- Does the IRS have a set time limit for reviewing an offer in compromise?
- If my client's Offer was accepted but now they can no longer afford to pay the Offered amount, can they renegotiate or do they have to start over again?
- Are offers-in-compromise considered cancellation of debt income after acceptance by the IRS?
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