- Instructor: Attorney Bob Schaller
- Lectures: 18
- Quizzes: 1
Expense Component of RCP Formulas – Part 2.
This course focuses on Part 2 of the “allowable monthly expenses” component of the “Future Income” calculation for the RCP formulas. The allowable monthly expense analysis determines the “allowability” of a taxpayer’s monthly expenses. The prior course, Part 1, focused on additional “allowable monthly expenses” topics.
Use of the qualifying adjective “allowable” alerts a taxpayer that not all expenditures are included in the IRS’ definition of “allowable monthly expenses.” Certain expenses, like a vehicle loan payment on a taxpayer’s fourth car, would not be allowed by the IRS and the RCP’s “Future Income” component would not be reduced as a result of this vehicle loan expense. Therefore, the RCP would be calculated as if that vehicle loan expense did not exist.
RCP amount for Lump-Sum Payment Offer = “NRE of assets” + “Future Income LSPO.” “NRE of assets” = quick sale value (QSV) less amounts owed to secured lien holders with priority over the federal tax lien, if applicable, and applicable exemption amounts and other reductions. “Future Income LSPO” = [(gross monthly income – allowable monthly expenses) * 12].
RCP amount for Periodic Payment Offer = “NRE of assets” + “Future Income PPO.” “NRE of assets” = quick sale value (QSV) less amounts owed to secured lien holders with priority over the federal tax lien, if applicable, and applicable exemption amounts. “Future Income PPO” = [(gross monthly income – allowable monthly expenses) * 24].
Overview of Expense Calculation for RCP
Retired and Paid-Off Debt
Retirement and Profit-Sharing Plan Expenses
Life Insurance Expenses
Charitable Contribution Expenses
Tuition & Education Expenses
Student Loan Expenses
Child Support Expenses
Loans Incurred to Fund OIC Offer
Credit Card Expenses
Current Year Tax Expenses
Past Year State & Local Tax Expenses
Closely Held Entities