IRS tax debt agreements have plummeted: 'I've never seen a number that low,' taxpayer advocate says

The Internal Revenue Service has been accepting far fewer deals from taxpayers trying to dig themselves out of tax debts , federal data shows.

The IRS accepted about 5,500 "offers in compromise" during the 2025 fiscal year, a 57% decline from 2023, when the agency accepted about 12,700 offers, according to agency data .

The IRS offer in compromise program allows taxpayers to settle their tax debts for less than the full amount owed. On IRS.gov, the agency describes it as a " legitimate " option for those who can't pay their debt or who would suffer financial hardship doing so.

Meanwhile, the number of compromise offers submitted to the IRS by taxpayers increased 29% over that time period, to about 38,800 in fiscal year 2025.

In other words, more people are applying for offers, but far fewer are successful, experts said.

"I've never seen a number that low," Nina Olson, the executive director of the Center for Taxpayer Rights, said of the accepted offers. "That's terrible."

Olson served as National Taxpayer Advocate at the IRS from 2001 to 2019.

Experts said the sharp decline in acceptances by the IRS may burden more taxpayers, especially those in lower-income households, who tend to rely more heavily on the OIC program, at a time when there's a broader affordability crisis in the U.S .

The trend, likely partly attributable to deep cuts to the IRS workforce during the second Trump administration, could also lead to lower tax revenues collected by the federal government, depending on how aggressively it tries to recover debts through other collection measures, experts said.

The financial amount of offers in compromise has steadily declined alongside the total number of accepted offers: OICs accepted by the IRS in fiscal year 2025 were worth $98.1 million, less than half the $214.5 million in 2023, data shows.

"These numbers are alarming," said Leslie Book, a law professor at Villanova University and director of the school's Tax Clinic, which provides free legal representation to low-income individuals in tax disputes.

The result is "crushing and stressful debt," largely for lower-income taxpayers who are seeking a "fresh start" through the OIC program, Book said.

However, he and other experts said it's unclear why the IRS has been accepting fewer offers.

"I feel like that's the question we all ask," said Emily Yaun, director of the Philip C. Cook Low-Income Taxpayer Clinic at Georgia State University.

"It's just more difficult than it used to be" to get offers accepted, she said.

An IRS spokesperson declined to comment on why the total number of offers accepted has fallen.

The federal government's authority to reach a compromise with taxpayers on their tax debts predates the modern income tax: Congress has allowed the IRS to compromise tax liabilities since 1864, according to a Tax Notes blog co-authored by Keith Fogg, who founded the Tax Litigation Clinic at Harvard University, and his research assistant Shane Rice.

Today, that authority takes the form of an offer in compromise, they wrote.

The goal is to reach an agreement "that suits the best interest of both the taxpayer and the agency," according to an IRS Tax Tip release from 2021.

The IRS accepts or rejects a taxpayer's offer based on their " reasonable collection potential ," which measures their ability to pay a tax debt. It assesses income, expenses and assets like a home, cars and bank accounts.

Low-earning households living "hand to mouth" often benefit from the OIC program, Fogg said in an interview with CNBC.

"It's pretty easy to get an offer [accepted] if you don't have anything: If you don't make much money or have many assets, you're a good offer candidate," said Fogg, who worked for more than three decades in the IRS Office of Chief Counsel.

It can be easier to rack up an insurmountable tax debt than people might think, he said.

For example, a taxpayer may make an innocent mistake on a tax return, perhaps a low-income single parent who claims a refundable tax break for children who lived with them for only five months instead of the requisite six months, Fogg said.

Or perhaps the taxpayer was laid off and needed to tap a 401(k) account to make ends meet, and then found they couldn't afford the associated income taxes and penalties, he said.

Interest on a tax debt can quickly make an innocent mistake snowball into something much bigger, experts said.

"It's not always that you're some horrible person" who's dodging taxes on purpose, Fogg said.

The average compromise offer accepted by the IRS in 2025 was about $18,000, according to federal data. It's unclear what the average tax debt was before a compromise.

The IRS generally doesn't accept offers if a debt can be paid another way, such as through an installment agreement, according to the agency.

The taxpayer must meet certain requirements, such as not being in bankruptcy proceedings. They must also be current on filing all required federal tax returns, even if they can't pay all the associated taxes. They must also have made all required estimated tax payments for the current year.

Indeed, tax compliance is a major incentive for the federal government to accept legitimate offers, experts said.

Aside from being current on tax filings, taxpayers whose OICs are accepted must pay their taxes on time for the next five years, otherwise, the offer is undone, and the prior tax debt springs back into existence, they said.

"A big part of the program is getting people back into the tax system and doing what they're supposed to do," Fogg said.

In this way, the government collects revenue it may not have otherwise, and taxpayers can get over an insurmountable financial hurdle, Book said.

The work of assessing an offer in compromise is often manual and labor-intensive, Book said.

That's because accepting or rejecting offers depends on analyzing the specific facts and circumstances of a taxpayer's case, which is generally difficult to automate, experts said.

Agency staff must assess taxpayer financials, vet application forms and review taxpayers' prior tax compliance, for example, they said.

A complete offer investigation can take up to 24 months, depending on inventory levels, case complexity and taxpayer circumstances, according to a frequently asked questions page on the IRS website.

The number of IRS workers has fallen significantly since January 2025 due to Trump administration efforts to reduce the federal workforce, according to a report published in June by the Treasury Inspector General for Tax Administration, a federal watchdog.

The IRS workforce shrank by about 31,000 people, or 28%, from the beginning of 2025 to January 2026, the inspector general report found. Specific roles within the agency, such as tax examiners and revenue agents, saw even higher reductions of about a third each.