The Shrinking Safety Net: IRS Tax Debt Agreements Plummet

Recent data from the Internal Revenue Service shows a 57% decline in accepted “offers in compromise,” a program designed to help taxpayers settle their debts for less than the full amount owed. In 2025, only 5,500 such agreements were accepted, down from 12,700 in 2023.

Taxpayer advocates are sounding the alarm about the consequences of this trend. Nina Olson, executive director of the Center for Taxpayer Rights, calls it “terrible.” The decline is likely due to deep cuts made to the IRS workforce during the second Trump administration – a reduction of 28% over four years. This has led to fewer staff and more debtors slipping through the cracks.

Low-earning households are being particularly hard hit by the decline in accepted offers. Leslie Book, a law professor at Villanova University and director of the school’s Tax Clinic, notes that these numbers are “alarming.” The result is crushing and stressful debt for those who rely on the OIC program as a lifeline.

Taxpayers themselves are also feeling the pinch. Emily Yaun, director of the Philip C. Cook Low-Income Taxpayer Clinic at Georgia State University, says it’s “just more difficult than it used to be” to get an offer accepted. This sentiment is echoed by others in the field.

The irony is stark: while the IRS accepts fewer offers, taxpayers are being saddled with larger tax debts. In 2025, accepted offers were worth $98.1 million, less than half the $214.5 million in 2023. This trend speaks to a broader issue – policymakers failing to address poverty and financial insecurity.

The OIC program’s emphasis on getting taxpayers back into compliance is crucial. Keith Fogg, a Harvard University researcher, notes that “a big part of the program is getting people back into the tax system and doing what they’re supposed to do.” This approach benefits both parties: the government collects revenue it might not have otherwise, while taxpayers get a fresh start.

However, this win-win scenario relies on a functioning IRS. With fewer staff and a shrinking budget, it’s no wonder that more offers are being rejected than ever before. Policymakers must step in to address the immediate consequences and explore long-term solutions.

The federal government’s authority to reach a compromise with taxpayers predates the modern income tax, dating back to 1864. Today, this authority is crucial for those struggling to make ends meet. As the number of accepted offers plummets, so too does the faith of taxpayers in this vital safety net.

The consequences will be far-reaching – not just for individuals but also for the broader economy. Rising interest rates and increasing tax compliance burdens will only exacerbate an affordability crisis that’s only just beginning to take shape.

Policymakers can no longer ignore the warning signs or sacrifice low-income households on the altar of fiscal austerity. By bolstering the IRS and addressing poverty, they can ensure that taxpayers have a vital safety net to fall back on. The clock is ticking – but it’s not too late for policymakers to act and restore the OIC program to its former glory, where both parties benefit from a fair compromise.