You Owe the IRS… But Do They Really Know What You Can Pay?
When the IRS comes after you for back taxes, they’re not just pulling numbers out of thin air. They use something called Reasonable Collection Potential (RCP) to decide what you should be able to pay—either in a lump sum, over time, or not at all.
Here’s the catch: once the IRS has calculated your RCP—based on financial info you give them—they’re going to stick to that number. So, if you want a say in what happens next, you need to understand the math before they do.
What Is RCP — and Why Should You Care?
Reasonable Collection Potential is the IRS’s way of measuring your ability to pay.
They look at two big things:
- The equity in your assets (bank accounts, vehicles, property, etc.)
- Your expected future income, reduced by allowable monthly living expenses
This number drives major decisions like:
- Whether you qualify for an Offer in Compromise
- Whether you’re eligible for Currently Not Collectible status
- What your Installment Agreement should look like
The higher your RCP, the more the IRS will expect you to pay—and the fewer options you’ll have for reducing or deferring your debt.
Timing Matters: Don’t Let the IRS Do the Math First
Most taxpayers don’t realize this, but once you start submitting financial documents (like Form 433-A or 433-F), the IRS is going to run their analysis—and they’ll base your payment options on what your financials look like right then.
That’s why it’s critical to do your own RCP analysis before you’re forced to hand over the numbers.
Understanding how the IRS will read your situation gives you a chance to:
- Identify assets that might be excluded or devalued
- Adjust your expenses to better reflect your financial reality
- Document any special circumstances that justify a lower payment expectation
In other words:
you can shape the outcome, but only if you act early.
Getting It Wrong Can Cost You
When taxpayers wait until the IRS demands financials, they’re often stuck:
- Reporting high income from seasonal or temporary work
- Showing inflated bank balances from one-time deposits
- Listing assets that could have been protected or restructured
All of these things can inflate your RCP and make you look more “collectible” than you actually are.
We Help You Stay One Step Ahead
I specialize in helping taxpayers analyze their RCP before the IRS forces the issue. That means we can:
- Run a mock financial analysis using IRS standards
- Explain where you stand now—and how the IRS will see it
- Suggest adjustments or documentation strategies to support a lower RCP
Whether you’re considering an Offer in Compromise or just want to avoid a bad Installment Agreement, we can help you control the process instead of reacting to it.
Talk to me before the IRS does. The earlier you understand your RCP, the more room you have to make it work in your favor.
