The Internal Revenue Service has experienced a significant drop in the number of tax debt settlement agreements it is accepting, according to federal data released recently. In fiscal year 2025, the agency approved roughly 5,500 offers in compromise, marking a substantial decrease from the approximately 12,700 agreements accepted two years earlier. An offer in compromise allows taxpayers to resolve their tax obligations for less than the full amount owed, particularly benefiting those facing financial hardship or inability to pay in full.
The decline in acceptances stands in stark contrast to increased demand for the program. During the same timeframe, the number of compromise offers submitted to the IRS grew by 29%, reaching approximately 38,800 in fiscal year 2025. This divergence has drawn concern from tax professionals and advocates. Nina Olson, executive director of the Center for Taxpayer Rights and former National Taxpayer Advocate, described the acceptance rate as historically low and characterized it as problematic. Leslie Book, a law professor at Villanova University who directs the school’s Tax Clinic, called the trend alarming, noting that it particularly affects lower-income households that depend on the program to obtain financial relief.
The monetary value of accepted offers has also declined significantly. In fiscal year 2025, approved offers totaled $98.1 million, less than half the $214.5 million accepted in 2023. The average compromise offer accepted was approximately $18,000. Experts have attributed the decline partly to workforce reductions at the IRS during the second Trump administration, though the agency has not publicly explained the reasons behind the falling acceptance rate.
The offers in compromise program, which dates back to Congressional authorization in 1864, functions by evaluating a taxpayer’s “reasonable collection potential”—their ability to pay based on income, expenses, and assets. Participants must meet specific requirements, including current tax filing status and payment of estimated taxes. Successfully accepted offers require taxpayers to remain compliant with tax obligations for five years; failure to do so results in reinstatement of the original debt.
Experts emphasize that the program serves an important dual purpose by collecting revenue the government might not otherwise receive while providing struggling taxpayers a path toward financial stability. Tax professionals note that substantial debts often accumulate from honest errors or unavoidable circumstances rather than intentional evasion, and interest compounds these initial mistakes rapidly. The reduced acceptance rate may increase financial burden on lower-income Americans already facing broader affordability challenges.
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