<P> Net realizable equity in assets is the quick sale value of the asset (often 80% of Fair Market Value (FMV)) minus any liabilities which are secured by the asset (e.g., a loan). As an example, if a taxpayer has a home worth $100,000 and owes $50,000 on the home, the IRS will calculate the net realizable equity in the asset as follows: ($100,000 x . 80) - $50,000 = $30,000 . The IRS expects, in this example, that the $30,000 will be included in the Offer amount . </P> <P> If a taxpayer believes he or she qualifies, the taxpayer completes a financial statement on a form provided by the Internal Revenue Service . Wage earners and self - employed individuals use Form 433 - A. Form 433 - B is for Offers involving all other business types . These financial statements identify all assets and liabilities as well as disposable income . </P> <P> Effective Tax Administration (or ETA) offers may apply where the taxpayer is ineligible for an offer in compromise based on either a theory of Doubt as to Liability or Doubt as to Collectibility . The taxpayer must establish that collecting on the tax liability would cause economic hardship, or - in the alternative - "where compelling public policy or equity considerations identified by the taxpayer provide a sufficient basis for accepting less than full payment ." </P> <P> An Offer in Compromise can be submitted to settle any federal tax liability incurred under the Internal Revenue Code . This includes both business taxes (payroll, income, etc .) and individual taxes (income, trust fund recovery penalties, etc .). </P>

The irs will consider an offer in compromise if