"Pennies on the Dollar": What the IRS's Own Numbers Show

"Pennies on the dollar" may be the most effective four words in tax relief advertising. They promise exactly what a scared taxpayer wants to hear. They also appear, word for word, in government allegations against at least one tax relief operation.

So let's do something the ads never do. Let's look at the IRS's own published numbers and see what they say about how tax debts actually get resolved.

Where the numbers come from

Every year the IRS publishes a Data Book with statistics on its operations. Table 4-1 covers delinquent collection activities: offers in compromise, installment agreements, liens, levies, and seizures. The figures below come from the 2025 edition, which covers fiscal years 2024 and 2025.

A caution before the numbers. These are counts of activity within a fiscal year. An offer received in one year may be decided in the next. So you cannot divide accepted by received and call it a precise acceptance rate. What you can do is see the scale of each tool.

Offers in compromise

Offers in compromise, IRS Data Book 2025, Table 4-1

The Data Book reports the dollar amounts in thousands: $163,383 thousand for 2024 and $98,146 thousand for 2025. Divide the 2025 amount by the 5,464 accepted offers and the average accepted offer works out to roughly $18,000. That is simple arithmetic on published figures, and it tells you the amount taxpayers agreed to pay, not how much debt was forgiven. The Data Book does not report the balances those offers settled.

The Data Book's footnote to the table states the rule directly: absent special circumstances, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement.

Installment agreements

Installment agreements, IRS Data Book 2025, Table 4-1

Put those side by side with the offer figures. In fiscal year 2025, the IRS established more than 3.1 million new installment agreements and accepted 5,464 offers. Payment plans are, by a very wide margin, the way the IRS resolves balances that cannot be paid at once.

The Data Book also notes that penalties and interest continue to accrue on balances in installment agreements until they are paid in full. A payment plan stops the escalation of enforcement. It does not stop the meter on interest.

Enforcement, for context

Selected enforcement activity, IRS Data Book 2025, Table 4-1

These numbers cut against two opposite myths. The first myth is that the IRS will come take your house tomorrow. Seizures were counted in the dozens. The second myth is that the IRS does nothing. Levies on third parties, such as banks and employers, numbered in the hundreds of thousands. The realistic threat for most people is a bank or wage levy, not a seizure.

What "pennies on the dollar" leaves out

An offer can produce a large reduction for the right taxpayer. I have no quarrel with that. The problem is the implication that it is available to everyone, or to most people, or to you before anyone has looked at your finances.

Section 7122 of the Internal Revenue Code lets the IRS compromise tax debts, and section 7122(d) requires the IRS to publish allowances for basic living expenses so taxpayers keep adequate means to live. The IRS's offer page says it considers your income, expenses, and asset equity. If those numbers show you can pay through a plan or your equity, the honest answer is a plan.

The FTC's 2010 complaint against American Tax Relief LLC alleged the company implied the IRS offered a one-time opportunity to settle debts, while most customers would at most qualify for installment plans requiring full repayment. And the Nevada Attorney General's 2025 announcement of its suit with the FTC against American Tax Service alleged promises to settle back taxes for "pennies on the dollar," often before reviewing a taxpayer's situation. See the FTC actions chapter.

How to use these numbers when you shop

You do not need to memorize statistics. You need a sense of proportion, and the right questions.

1. If someone says you qualify for an offer, ask what your reasonable collection potential is and how they computed it from your actual income, expenses, and assets.
2. Ask why a payment plan would not work in your case, given that payment plans are the most common resolution by far.
3. Run the IRS's free Offer in Compromise Pre-Qualifier yourself and compare.
4. Ask what the plan is if the offer is not accepted, and whether that work is in the fee.

A good advisor welcomes those questions. The offer in compromise chapter explains when an offer is a real option, and the OIC mill chapter explains what the IRS says about the sales side.

The less exciting truth

Here is the part that does not fit on a billboard. For most people who owe more than they can pay at once, the right resolution is boring: file what is missing, get a payment plan you can actually afford, stop the enforcement, and look for penalty relief where the facts support it.

Boring is good. Boring is predictable. Boring does not cost a fortune in fees. If a professional tells you that your case is boring, that is often the most valuable thing they will say. The how attorneys resolve IRS debt chapter walks through the ordinary path.

A rough way to think about your own numbers

Before anyone sells you anything, sketch your own picture on one page. Write down what you owe the IRS by year. Write down your monthly household income and your necessary monthly expenses. Write down what your house, cars, and accounts are worth and what you owe against them.

Now ask two plain questions. Could the monthly difference between income and necessary expenses pay this debt over a reasonable period? Could the equity in what you own pay a meaningful part of it? If the answer to either is clearly yes, a payment plan or a combination of payment and equity is the likely path. If both answers are clearly no, an offer or a hardship status may deserve a real look. The calculator on this site runs a simplified version of that sorting.

It is rough. It is not the IRS's formula, which applies published expense standards and detailed asset valuation rules. But it is enough to keep you grounded when someone on the phone tells you a number that sounds too good.

Why the advertising number is never your number

A tax relief ad that mentions a dramatic settlement is describing someone else's facts at best. The FTC's consumer advice notes that tax relief companies may cite other customers' results, and reminds consumers that no company can promise a particular result.

Your settlement, if you get one, is a function of your income, your allowable expenses, and your equity. Nobody else's case moves those numbers by a dollar.

When the numbers favor an offer

None of this means offers are rare for everyone. They concentrate where the facts point: people whose income after allowable living expenses is low, whose assets have little equity, and whose debt is large compared to what they could pay over the remaining collection period. For those taxpayers, an offer is not a long shot. It is the logical tool, and a carefully documented one can be accepted.

The point is that your facts decide which group you are in. A salesperson's enthusiasm does not. Neither does an advertisement's headline. Get the analysis first, then decide.