The Internal Revenue Service accepted 57% fewer “Offer in Compromise” tax debt settlements in fiscal year 2025 compared to fiscal year 2023, according to federal agency data. The decrease in accepted offers occurred as the number of applications from taxpayers for the program rose by 29% during the same period.
According to IRS statistics, the agency accepted approximately 5,500 offers in fiscal year 2025, a reduction from about 12,700 in 2023. Taxpayer submissions for the program increased to roughly 38,800 in 2025.
The Offer in Compromise (OIC) program allows certain taxpayers to resolve their tax liability with the IRS for a lower amount than what they originally owed. The agency’s website states the program is an option for taxpayers who cannot pay their full tax debt or for whom doing so would create a financial hardship.
The total dollar amount of accepted offers also decreased, falling from $214.5 million in fiscal year 2023 to $98.1 million in 2025, the data shows.
Tax experts and former government officials have commented on the trend. Nina Olson, executive director of the Center for Taxpayer Rights and the former National Taxpayer Advocate from 2001 to 2019, remarked on the 2025 acceptance figures, stating, “I’ve never seen a number that low.”
Leslie Book, a law professor and director of the Tax Clinic at Villanova University, described the numbers as “alarming.” Tax professionals have noted that the reason for the decline in acceptances alongside an increase in applications is not officially clear.
An IRS spokesperson declined to comment on the reasons for the trend. In a statement, the agency noted that the acceptance rate for OIC cases that reached a formal determination has “remained stable.” The IRS said about 53% of such cases resulted in acceptance in fiscal year 2026, compared to approximately 51% in the same period of fiscal year 2025. The agency did not provide data on the total number of applications returned for errors or missing information before a formal determination is made.
Some tax experts have pointed to agency staffing levels as a potential factor. A June report from the Treasury Inspector General for Tax Administration, a federal watchdog, found that the IRS workforce was reduced by about 31,000 employees, or 28%, between the beginning of 2025 and January 2026.
Olson suggested a potential link between staffing and the OIC program’s function. “There needs to be a human being looking at this,” she said, referencing the case-specific analysis required for each offer.
The IRS declined to comment on whether staffing levels have affected OIC acceptance rates. In congressional testimony in March, IRS Chief Frank Bisignano stated he “feel[s] good about the number of employees [he] has right now.”
Other tax specialists have proposed alternative explanations. Emily Yaun, director of the Philip C. Cook Low-Income Taxpayer Clinic at Georgia State University, suggested the IRS may be favoring other collection alternatives, such as placing taxpayers in “currently not collectible” status. This status temporarily delays collection but allows interest and penalties to continue to accrue.
Yaun also described changes in her experience with the OIC process for older clients, stating the IRS has more frequently required homeowners of Social Security age to provide a denial letter for a reverse mortgage to demonstrate they cannot tap their home equity. The IRS did not comment on whether it had formally updated its policy regarding reverse mortgages for OIC applications.
