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Common Tax Terms

Definitions of Tax Terminology

  1. Current Value
  2. Expenses Not Generally Allowed
  3. Future Income
  4. Necessary Expenses
  5. Notice of Federal Tax Lien
  6. Offer in Compromise (OIC)
  7. Quick Sale Value (QSV)
  8. Realizable Value
  9. Reasonable Collection Potential (RCP)

Current Value

  • The amount you could reasonably expect from the sale of an asset today.

Expenses Not Generally Allowed

  • The IRS typically does not allow you claim tuition for private or public schools, charitable contributions, voluntary retirement contributions, payments on unsecured debts such as credit card bills, cable television charges and other similar expenses as necessary living expenses. However the IRS can allow these expenses when you prove that they are necessary for the health and welfare of you or your family or for the production of income.

Future Income

  • The Internal Revenue Service generally determines the amount they can collect from your future income by subtracting necessary living expenses from your monthly income over a set number of months.

Necessary Expenses

  • The allowable payments you make to support you and your families health and welfare and/or the production of income.

Notice of Federal Tax Lien

  • A Federal Tax Lien is a legal claim to the property of a taxpayer by the Federal Government. A Notice of Federal Tax Lien may be filed after a tax liability is assessed and full payment is not made. Liens are generally not released until full payment is made and/or ten years after the initial assessment.

Offer in Compromise (OIC)

  • Offer in compromise is used when the Internal Revenue Service agrees to settle for less than the amount owed because it seems unlikely that any more can be collected from the taxpayer.

Quick Sale Value (QSV)

  • The amount you could reasonably expect from the sale of an asset if you sold it quickly. Typically in ninety days or less. This amount is generally less than current value, but may be equal to or higher based on local circumstances.

Realizable Value

  • The quick sale value amount minus what you owe to a secured creditor. The creditor must have priority over a filed Notice of Federal Tax Lien before the IRS will allow a subtraction from the asset's value.

Reasonable Collection Potential (RCP)

  • The total realizable value of your assets plus your future income. The total is generally your minimum offer amount.