The Internal Revenue Service has significantly reduced its acceptance rate for offers in compromise, a program that allows taxpayers to settle tax debts for less than the full amount owed. According to federal data, the IRS accepted about 5,500 such offers during fiscal year 2025, marking a steep 57% decline compared to roughly 12,700 acceptances in 2023. During the identical timeframe, the number of offers submitted to the agency increased by 29%, reaching approximately 38,800 in fiscal year 2025. This divergence between applications and acceptances has drawn concern from tax experts and advocates.
Nina Olson, executive director of the Center for Taxpayer Rights and former National Taxpayer Advocate, characterized the acceptance figures as historically low and concerning. Leslie Book, a tax law professor at Villanova University and former director of the university’s Tax Clinic, described the trend as alarming, noting that the decline particularly affects lower-income households who depend most heavily on the program. The financial value of accepted offers has also dropped substantially, with fiscal year 2025 compromises totaling $98.1 million compared to $214.5 million in 2023—less than half the previous figure.
The precise reasons for the declining acceptance rate remain unclear. An IRS spokesperson declined to comment on the matter, and experts expressed uncertainty about the underlying causes, though some suggested that workforce reductions during the second Trump administration may play a role. The decline could have broader economic implications, potentially increasing burdens on lower-income taxpayers facing tax debt while also affecting federal tax revenue collection, depending on how aggressively the government pursues alternative collection strategies.
The offer in compromise program, rooted in legislation dating back to 1864, evaluates applicants based on their “reasonable collection potential”—an assessment of income, expenses, and assets. The average accepted offer in 2025 was approximately $18,000. To qualify, taxpayers must meet requirements including current tax filing status and maintaining tax compliance for five years following approval, or risk the original debt being reinstated. Experts view the program as mutually beneficial, allowing taxpayers to resolve insurmountable debt while encouraging continued tax system participation and compliance.
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