The Internal Revenue Service has experienced a sharp decline in accepting offers in compromise, agreements that allow taxpayers to settle tax debts for less than the full amount owed. During the 2025 fiscal year, the IRS accepted approximately 5,500 such offers, representing a 57% decrease compared to 2023, when the agency accepted about 12,700 offers. Simultaneously, the number of applications submitted by taxpayers increased 29% to roughly 38,800 in the same period, creating a scenario where more people are seeking relief but fewer are receiving it.
Experts have expressed concern about the implications of this trend, particularly for lower-income households that typically rely more heavily on the offer in compromise program. Nina Olson, executive director of the Center for Taxpayer Rights and former National Taxpayer Advocate, called the acceptance numbers alarming. The financial value of accepted offers has also declined substantially, with 2025 offers worth $98.1 million compared to $214.5 million in 2023. The cause of the decline remains unclear, with an IRS spokesperson declining to comment, though experts have suggested that workforce reductions during the recent administration may play a role.
The offer in compromise program has deep historical roots, with congressional authority for tax compromise dating back to 1864. Decisions to accept or reject offers are based on “reasonable collection potential,” which evaluates a taxpayer’s income, expenses, and assets. Low-income individuals who lack significant financial resources often qualify for such agreements. Tax experts note that substantial debts can accumulate from relatively minor initial mistakes—such as incorrectly claiming tax credits or taking emergency withdrawals from retirement accounts—which interest and penalties then compound over time.
The requirements for participation include maintaining current status on all tax filings and estimated payments, with successful applicants required to remain tax-compliant for five years following acceptance. Experts characterize the program as mutually beneficial, allowing the government to collect revenue it might otherwise not recover while providing financially burdened taxpayers a pathway to relief. The decline in acceptances has prompted concern among tax law professors and clinic directors who work with low-income clients, given the labor-intensive nature of assessing individual offers and the potential strain on vulnerable populations facing unresolvable tax obligations.
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