IRS approves significantly fewer tax settlement offers

The Internal Revenue Service (IRS) has seen a significant decline in the approval of ‘Offers in Compromise’ (OIC), a program that allows eligible taxpayers to settle federal tax debts for less than the full amount owed. Federal data indicates that while the number of compromise offers submitted by taxpayers increased by 29% to approximately 38,800 in fiscal year 2025, the number of accepted offers fell to about 5,500. This represents a 57% decline from the 12,700 offers accepted in 2023.

The total financial value of accepted offers has also dropped sharply, falling from $214.5 million in 2023 to $98.1 million in fiscal year 2025. Experts suggest the trend may be linked to workforce cuts within the agency, though the exact cause remains unclear. The widening gap between rising demand for relief and falling approval rates creates uncertainty for taxpayers and financial advisers. The IRS evaluates these applications based on an individual's income, expenses, assets, and ability to pay, often requiring detailed financial records to prove that full collection is unlikely or would cause serious hardship.