The Internal Revenue Service has significantly reduced the number of tax debt settlement agreements it accepts from taxpayers, according to federal data released recently. During fiscal year 2025, the agency approved approximately 5,500 offers in compromise—agreements allowing taxpayers to settle debts for less than the full amount owed—representing a substantial decline from the roughly 12,700 offers accepted in 2023. This represents a 57% decrease over the two-year period. The trend contrasts sharply with increased demand for the program, as the number of offers submitted to the IRS rose 29% to approximately 38,800 in 2025.
Experts have expressed concern about the implications of the declining acceptance rate, particularly for lower-income households that depend more heavily on the offer in compromise program. Nina Olson, executive director of the Center for Taxpayer Rights and former National Taxpayer Advocate, characterized the acceptance numbers as unprecedented and troubling. Tax law professors and clinic directors specializing in low-income tax issues similarly described the trend as alarming and likely to increase financial hardship for vulnerable populations already facing broader affordability challenges in the United States. The dollar value of accepted offers has also dropped substantially, from $214.5 million in 2023 to $98.1 million in 2025.
The IRS has not publicly explained the decline in acceptances, though experts have speculated that workforce reductions during recent years may contribute to the trend. The program’s administrative requirements, including manual review of applicants’ financial situations, require considerable staff resources. The average compromise offer accepted in 2025 was approximately $18,000. Historically, the authority to compromise tax debts has existed since 1864, with the modern program designed to assess taxpayers’ reasonable collection potential based on income, expenses, and assets.
The offer in compromise program serves as a mechanism for achieving tax compliance while providing relief to struggling taxpayers. Borrowers whose offers are accepted must remain current on tax filings and make timely payments for five years, or the original debt is reinstated. Experts note that the program addresses situations where tax debts accumulate through innocent errors, unexpected job loss, or circumstances beyond taxpayers’ control, and that accepting legitimate offers can increase overall federal tax revenue collection by returning compliant filers to the system.
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