The Internal Revenue Service has substantially reduced its acceptance rate for 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 sharp 57% decline from the 12,700 acceptances recorded in 2023. The trend has drawn concern from tax policy experts and advocates, particularly given that the number of compromise offers submitted by taxpayers during this period actually increased by 29%, reaching about 38,800 applications.
The financial value of accepted offers has also contracted significantly. Compromises approved in fiscal year 2025 totaled $98.1 million, less than half the $214.5 million in 2023. The average offer accepted last year was approximately $18,000. Nina Olson, executive director of the Center for Taxpayer Rights and former National Taxpayer Advocate, characterized the acceptance numbers as historically low and concerning.
Experts suggest the decline may disproportionately affect lower-income households that depend heavily on the offer in compromise program to resolve tax disputes. The reduction in acceptances could intensify financial hardship for vulnerable taxpayers while potentially affecting federal tax revenue collection, depending on how aggressively the IRS pursues alternative collection methods. The precise reasons for the diminished acceptance rate remain unclear, with an IRS spokesperson declining to provide explanation. Some observers have attributed the trend to workforce reductions at the agency.
The offer in compromise program has existed in some form since 1864, with modern applications based on an individual’s reasonable collection potential—an assessment of their ability to pay considering income, expenses, and assets. Experts note that tax debt can accumulate unexpectedly through innocent mistakes, job loss, or other circumstances rather than deliberate evasion. Once accepted, taxpayers must maintain tax compliance for five years or face reinstatement of the original debt.
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