The facade of the Internal Revenue Service building in Washington.<\/p>\n
Wesley Lapointe \/ The Washington Post via Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
The Internal Revenue Service has been accepting far fewer deals from taxpayers trying to dig themselves out of tax debts<\/a>, federal data shows. <\/p>\n The IRS accepted about 5,500 “offers in compromise” during the 2025 fiscal year \u2014 a 57% decline from 2023, when the agency accepted about 12,700 offers, according to agency data<\/a>.<\/p>\n The IRS offer in compromise<\/a> 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<\/a>” option for those who can’t pay their debt or who would suffer financial hardship doing so. <\/p>\n 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.<\/p>\n In other words, more people are applying for offers, but far fewer are successful, experts said. <\/p>\n “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.”<\/p>\n Olson served as National Taxpayer Advocate at the IRS from 2001 to 2019. <\/p>\n<\/div>\n Experts said the sharp decline in acceptances by the IRS may burden more taxpayers \u2014 especially those in lower-income households, who tend to rely more heavily on the OIC program \u2014 at a time when there’s a broader affordability crisis in the U.S<\/a>. <\/p>\n The trend \u2014 likely partly attributable to deep cuts to the IRS workforce during the second Trump administration \u2014 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.<\/p>\n 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. <\/p>\n “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. <\/p>\n The result is “crushing and stressful debt,” largely for lower-income taxpayers who are seeking a “fresh start” through the OIC program, Book said.<\/p>\n However, he and other experts said it’s unclear why the IRS has been accepting fewer offers. <\/p>\n “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. <\/p>\n “It’s just more difficult than it used to be” to get offers accepted, she said. <\/p>\n An IRS spokesperson declined to comment on why the total number of offers accepted has fallen. <\/p>\n<\/div>\n Sarah Silbiger for The Washington Post via Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n 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<\/a> co-authored by Keith Fogg, who founded the Tax Litigation Clinic at Harvard University, and his research assistant Shane Rice. <\/p>\n Today, that authority takes the form of an offer in compromise, they wrote. <\/p>\n 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<\/a> release from 2021. <\/p>\n The IRS accepts or rejects a taxpayer’s offer based on their “reasonable collection potential<\/a>,” which measures their ability to pay a tax debt. It assesses income, expenses and assets like a home, cars and bank accounts.\u00a0<\/p>\n Low-earning households living “hand to mouth” often benefit from the OIC program, Fogg said in an interview with CNBC.<\/p>\n “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.<\/p>\n<\/div>\n It can be easier to rack up an insurmountable tax debt than people might think, he said. <\/p>\n For example, a taxpayer may make an innocent mistake on a tax return \u2014 perhaps a low-income single parent who claims a refundable tax break<\/a> for children who lived with them for only five months instead of the requisite six months, Fogg said. <\/p>\n Or perhaps the taxpayer was laid off and needed to tap a 401(k) account to make ends meet \u2014 and then found they couldn’t afford the associated income taxes and penalties, he said. <\/p>\n Interest on a tax debt can quickly make an innocent mistake snowball into something much bigger, experts said. <\/p>\n “It’s not always that you’re some horrible person” who’s dodging taxes on purpose, Fogg said. <\/p>\n 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. <\/p>\n<\/div>\n 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. <\/p>\n 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<\/a>\u00a0all required estimated tax payments for the current year.<\/p>\n Indeed, tax compliance is a major incentive for the federal government to accept legitimate offers, experts said. <\/p>\n Aside from being current on tax filings, taxpayers whose OICs are accepted must pay their taxes on time for the next five years \u2014 otherwise, the offer is undone, and the prior tax debt springs back into existence, they said. <\/p>\n “A big part of the program is getting people back into the tax system and doing what they’re supposed to do,” Fogg said. <\/p>\n In this way, the government collects revenue it may not have otherwise, and taxpayers can get over an insurmountable financial hurdle, Book said.<\/p>\n It’s a “win-win,” Book said. <\/p>\n<\/div>\n Arlene Rusch shows an email notifying her that she has been laid off from the IRS, as she leaves her office in downtown Denver, Colorado, Feb. 20, 2025. The IRS began laying off roughly 6,000 employees in the middle of the 2025 tax season as the Trump administration slashed the federal workforce.<\/p>\n Hyoung Chang | Denver Post | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n The work of assessing an offer in compromise is often manual and labor-intensive, Book said. <\/p>\n 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. <\/p>\n Agency staff must assess taxpayer financials, vet application forms and review taxpayers’ prior tax compliance, for example, they said. <\/p>\n 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<\/a> page on the IRS website. <\/p>\n 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<\/a> published in June by the Treasury Inspector General for Tax Administration, a federal watchdog. <\/p>\n<\/div>\n I’ve never seen a number that low. That’s terrible.<\/p>\n Nina Olson<\/p>\n executive director of the Center for Taxpayer Rights and former National Taxpayer Advocate<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n The IRS workforce shrank by about 31,000 people \u2014 or 28% \u2014 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.<\/p>\n The report said staffing shortages pose “elevated operational risks” for the agency.<\/p>\n “There are no employees to do this kind of work,” said Olson, of the Center for Taxpayer Rights. “There needs to be a human being looking at this,” she added. <\/p>\n The IRS workers who remain may be under pressure to reject more applications, Fogg said. <\/p>\n “It’s easier to say no than it is to say yes,” he said. <\/p>\n The IRS declined to comment on whether agency staffing has played a role in the lower number of OIC acceptances.<\/p>\n IRS chief Frank Bisignano testified before Congress in March<\/a> that he “feel[s] good about the number of employees [he] has right now” at the agency. In April before the Senate Finance Committee, he denied that the agency was understaffed.<\/p>\n<\/div>\n Chip Somodevilla | Getty Images News | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n But lower OIC acceptances can’t be fully explained by Trump administration workforce reduction measures, since a noticeable decline started during the Biden era, too. <\/p>\n Experts said other theoretical explanations could explain the drop in OIC acceptances.<\/p>\n For example, the applications can be cumbersome and technical for taxpayers, Fogg said. <\/p>\n The IRS sometimes returns an application if there’s a mistake or missing information \u2014 rendering it unable to be processed \u2014 rather than accepting or rejecting it outright. <\/p>\n It’s possible that more OICs are being submitted with errors, meaning fewer applications make it to the stage where they’re able to be accepted or rejected, experts said.<\/p>\n The IRS hinted at this possibility, at least for fiscal years 2025 and 2026. The federal fiscal year runs through Sept. 30. <\/p>\n “The acceptance rate for offer in compromise cases that reached an acceptance or rejection determination has remained stable in fiscal year 2026 compared with fiscal year 2025,” the IRS said in an emailed statement.<\/p>\n About 53% of those cases resulted in an acceptance in fiscal year 2026, compared with approximately 51% during the same period in fiscal year 2025, it said. <\/p>\n<\/div>\n The agency declined to share data on the total number of offers in compromise cases accepted during the current fiscal year. The agency also declined to elaborate on why acceptances have dropped in recent years, or whether IRS criteria for vetting the applications have changed. <\/p>\n There hasn’t been any public disclosure of such a change in criteria or formula, Fogg said. <\/p>\n “I think a lot of it is up to [IRS] discretion, and they’re just less willing” to accept offers, said Yaun, with Georgia State University. “It’s got to be their training: They’re being told, ‘Offers are not our preferred method.'”<\/p>\n For example, the IRS may instead prefer to keep taxpayers in a status called “currently not collectible<\/a>,” Yaun said. With this status, the IRS temporarily delays collecting on a tax debt because an individual can’t afford to pay it on top of their basic living expenses. <\/p>\n However, the IRS can still garnish a person’s tax refunds, place a lien on their property<\/a> and continue charging interest and penalties while they are in that status \u2014 in contrast with some aspects of the OIC program<\/a>. <\/p>\n<\/div>\n Perhaps the IRS believes it will collect more revenue by keeping taxpayers in “currently not collectible” status than by accepting an offer in compromise, Yaun said. <\/p>\n In her work with clients, Yaun has noticed a tweak in the IRS approach with elderly taxpayers. <\/p>\n For example, to receive an OIC acceptance in recent years, the agency has been requiring Social Security-age homeowners to have received a reverse mortgage denial from lenders, Yaun said, referencing her experience with clients. It appears the IRS wants to see that taxpayers are unable to tap their home equity via a reverse mortgage, she said.<\/p>\n By contrast, a few years ago, the agency was generally satisfied if seniors had been denied for a home equity line of credit, Yaun said. Now, it wants to see both \u2014 and many taxpayers haven’t been willing to go that route, she said. <\/p>\n The home may be a low earner’s only asset, and the taxpayer often wants to leave it to their children \u2014 something that may not be possible with a reverse mortgage, Yaun said. <\/p>\nIRS program is a ‘win-win’<\/h2>\n
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IRS workforce shrinks 28% during Trump administration <\/h2>\n
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‘It’s got to be their training’<\/h2>\n
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