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

IRS tax debt agreements have plummeted: 'I've never seen a number that low,' taxpayer advocate says. "I've never seen a number that low," Nina Olson, the executive director of the Center for Taxpayer Rights, said of the accepted offers.

What happened

The OIC program lets taxpayers settle a tax debt for less than the full amount owed. Wesley Lapointe / The Washington Post via Getty ImagesThe Internal Revenue Service has been accepting far fewer deals from taxpayers trying to dig themselves out of tax debts, federal data shows. The IRS offer in compromise program allows taxpayers to settle their tax debts for less than the full amount owed. 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.

"Olson served as National Taxpayer Advocate at the IRS from 2001 to 2019. The result is "crushing and stressful debt," largely for lower-income taxpayers who are seeking a "fresh start" through the OIC program, Book said. IRS program is a 'win-win'Sarah Silbiger for The Washington Post via Getty ImagesThe 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.

The wider picture

The IRS accepts or rejects a taxpayer's offer based on their "reasonable collection potential," which measures their ability to pay a tax debt. 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. Nina Olsonexecutive director of the Center for Taxpayer Rights and former National Taxpayer AdvocateThe IRS workforce shrank by about 31,000 people — or 28% — from the beginning of 2025 to January 2026, the inspector general report found.

More taxpayers have been applying for an "offer in compromise" since 2023, but the IRS has accepted far fewer requests. Tax experts are unsure why. Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuKey PointsThe number of "offers in compromise" accepted by the IRS has fallen 57% since 2023. Meanwhile, taxpayer requests have increased 29%. It's unclear why that divergence — falling acceptances amid more taxpayer demand — is happening, experts said. It's for those who can't pay their debt, or who would suffer a financial hardship by doing so.

What has been reported

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. 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. 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. "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. Cook Low-Income Taxpayer Clinic at Georgia State University. An IRS spokesperson declined to comment on why the total number of offers accepted has fallen.

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.

What happens next

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 unclear what the average tax debt was before a compromise. watch nowVIDEO5:0405:04IRS audit rate for high earners falls: Here's what to knowSquawk BoxThe 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. In this way, the government collects revenue it may not have otherwise, and taxpayers can get over an insurmountable financial hurdle, 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.