IRS Accepted Fewer Tax Debt Settlements in 2025
Taxpayers seeking debt relief faced a lower approval rate even as applications for offers in compromise surged.
Updated on Oct. 2, 2026 in Taxes
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Should the IRS increase the acceptance rate for offers in compromise to help taxpayers settle debts?
In fiscal year 2025, the Internal Revenue Service accepted 5,500 offers in compromise, a 57% decline from the 12,700 cases approved in 2023. During this same period, the number of submitted offers increased by 29%, reaching 38,800 submissions.
Why it matters
The drop in accepted settlements limits a key pathway for taxpayers to resolve outstanding debts for less than the full amount owed, potentially increasing financial pressure on those with limited resources. This trend reflects a notable shift in the agency's approval volume during the most recent fiscal year.
The IRS accepted 5,500 offers in compromise in fiscal year 2025, down from 12,700 in 2023. These settlements totaled $98.1 million, with an average accepted offer amount of $18,000 for the thousands of households seeking to settle their tax liabilities.
The players
Internal Revenue Service
The federal agency responsible for administering tax laws, managing collection of tax debt, and processing offers in compromise for qualified taxpayers.
The details
The IRS evaluates these applications based on the 'reasonable collection potential' of the taxpayer, which aggregates income, expenses, and asset values. If an offer is approved, the taxpayer must maintain strict tax compliance for five years to prevent the debt from being reinstated. Projections indicate this reduced acceptance rate could shift the burden on lower-income taxpayers and alter overall federal tax revenue collection.
Timeline
1864: The offer in compromise program was originally established by legislation.
2023: The IRS accepted 12,700 offers in compromise.
Fiscal year 2025: The IRS accepted 5,500 offers in compromise.
Money Landscape
The recent decline in settled tax debts marks a sharp departure from the activity levels seen in 2023. This contraction shifts the operational reality for the long-standing IRS offer in compromise program established in 1864.
Taxpayers considering an offer in compromise should prepare for a rigorous review process given the recent decline in approval rates. Because approval requires meeting specific financial thresholds and maintaining five years of compliance, consult a tax professional to evaluate your eligibility.
The takeaway
The recent decline in successful settlements highlights the importance of thorough financial preparation for those managing tax debt. If you are struggling with a liability, review your personal financial standing and consult a qualified tax professional to discuss all available resolution paths.
Further reading
For more on managing your obligations, visit our guide on Taxes.
Source note: This article includes information reported by RocketNews.
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Should the IRS increase the acceptance rate for offers in compromise to help taxpayers settle debts?
