An offer in compromise can give someone with an unmanageable tax debt a path forward. But the latest IRS figures show a difficult trend: taxpayers submitted more offers in fiscal year 2025 than in 2023, while the IRS accepted far fewer in the last decade. That reflects some of what we are seeing in our own tax-resolution work—longer waits for case review and more difficulty resolving questions with the IRS employee assigned to an offer when some is finally assigned to the case.
Why an offer matters
An offer in compromise allows an eligible taxpayer to settle a federal tax debt for less than the full amount owed. It is not simply a request for a discount. For an offer based on inability to pay, the IRS evaluates what it believes it can reasonably collect, looking at available equity in assets and future income after allowable expenses.
That distinction matters when a taxpayer’s circumstances have changed. Someone may have incurred a tax debt while earning more, then lost a job or seen a business decline. A household renting its home and earning just enough to cover necessary expenses may have little ability to pay an old balance. For taxpayers in that position, a realistic settlement can resolve a debt that might otherwise remain out of reach.
The numbers—and our experience
According to the IRS’s fiscal year 2025 data, taxpayers submitted 38,797 offers, and the agency accepted 5,464. CNBC reported that acceptances fell 57% from fiscal year 2023 even as submissions rose 29%. These are annual totals, not the acceptance rate for the same group of applications: an offer submitted in one fiscal year may be decided in another. The figures show a sharp divergence, but they do not establish why it happened (reduction on IRS workforce might be one of the reasons).
In our practice, we have experienced longer periods between submitting an offer and hearing from the assigned IRS employee about whether more information is needed. We have also challenged calculations in some cases—particularly where we disagree with how the IRS has evaluated a taxpayer’s ability to pay—and then had difficulty reaching the assigned employee for weeks. That delay is frustrating when a taxpayer’s financial situation needs to be understood, not just entered into a worksheet.
The IRS uses collection financial standards when reviewing living expenses. Those standards are important, but they do not always capture a household’s actual circumstances. The IRS says it may allow documented actual expenses when applying the standards would leave a taxpayer without enough for basic living expenses. That makes clear records and a specific explanation of any disputed calculation essential.
What taxpayers should know
An offer in compromise is not the right solution for every tax debt. The IRS generally expects taxpayers to be current with required returns and current-year tax obligations, and it may prefer another payment option if the debt can be paid in full. An accepted offer also comes with ongoing filing and payment requirements.
If the IRS rejects an offer, the decision is not necessarily the end of the matter: taxpayers generally have 30 days from the date of the rejection letter to request an appeal. The strongest response identifies the particular asset value, income figure, or expense calculation in dispute and provides evidence supporting a different result.
The decline in accepted offers deserves attention, but it should not discourage someone from exploring a legitimate option. When a taxpayer cannot realistically pay a tax debt in full, the question should be what the IRS can reasonably collect—and whether the financial information tells that story accurately.
Link CNBC article – IRS tax debt agreements have plummeted: ‘I’ve never seen a number that low,” the taxpayer advocate says
