New Jersey Tax Settlement Rate Plunges to 12% 

‍State records from the NJ Division of Taxation show Offer in Compromise and Settlement Agreement approval rates dropped sharply from FY 2022 to FY 2025 — a decline steeper than the IRS's own federal settlement trend — while collections from enforcement activity rose to $53.5 million.

New Jersey taxpayers seeking to settle state tax debts faced a sharply lower approval rate in fiscal year 2025, according to records provided by the New Jersey Department of the Treasury.

The Division of Taxation reported that the acceptance rate for Offers in Compromise (OIC) and Settlement Agreements fell from 55% in FY 2022 to 12% in FY 2025. Over the same period, collections from listed enforcement activity rose from $25.2 million to $53.5 million.

The records were provided by the New Jersey Department of the Treasury's Government Records Access Unit in response to public records request C255751. The data covers Division of Taxation enforcement and resolution activity for fiscal years 2021-22 through 2024-25.

Key Findings

• Offer in Compromise and Settlement Agreement acceptance rates fell from 55% in FY 2022 to 12% in FY 2025.
• Collections from listed enforcement activities rose from $25.2 million in FY 2022 to $53.5 million in FY 2025, an increase of 112%.
• Payment plans increased from 16,766 in FY 2022 to 24,278 in FY 2025.
• Audits declined from 142,895 in FY 2022 to 65,900 in FY 2025, while total assessments remained above $566 million in FY 2025.

Settlement Approval Rate Declines

In FY 2022, the Division of Taxation received 153 Offer in Compromise and Settlement Agreement applications and approved approximately 55%, meaning roughly 84 taxpayers reached a resolution. By FY 2025, with 143 applications received and 12% approved, approximately 17 taxpayers succeeded.

The acceptance rate fell each year: 55% in FY 2022, 51% in FY 2023, 23% in FY 2024, and 12% in FY 2025.

According to Jacquelyn McCarty, manager of the Government Records Access Unit, the acceptance rate represents accepted applications divided by applications received for each fiscal year, under New Jersey tax law governing the division's settlement authority.

Collection Activity Increases Across Categories

The division's use of several collection tools increased over the four-year period:

Total collections from these activities rose from $25,248,636 in FY 2022 to $53,532,908 in FY 2025, an increase of 112%.

Fiscal Year

Total Collected

FY 2022

$25,248,636

FY 2023

$40,145,687

FY 2024

$54,357,327

FY 2025

$53,532,908

Payment Plan Volume Grows

The division established 24,278 payment plans in FY 2025, up from 16,766 in FY 2022 — an increase of 44.8%. Under an installment agreement, taxpayers agree to pay their tax balance over time rather than negotiate a reduced settlement.

Audit Volume Declines While Assessments Remain Elevated

The number of audits conducted by the division fell from 142,895 in FY 2022 to 65,900 in FY 2025, a decline of 53.9%. Despite fewer audits, total assessments remained above $566 million in FY 2025, compared to $541 million in FY 2022.

How NJ's Offer in Compromise Compares With an IRS Tax Settlement

New Jersey's OIC program runs alongside, but separately from, the Offer in Compromise process administered by the IRS (Internal Revenue Service). IRS offers use ability-to-pay analysis, but New Jersey compromises may also rest on doubt as to liability, doubt as to collectability, or extreme financial hardship expressly under state law. IRS rules require that status, but New Jersey's compromise rulemaking and Form 906 materials reviewed do not state those filing, withholding, and estimated-payment prerequisites before a compromise will be considered.

By comparison, national IRS data show a similar downward trend at the federal level: the IRS accepted about 21% of offers nationwide in fiscal year 2024, down from a rate that had been over 42% the year before. Under federal law, the IRS generally can't collect a federal tax debt after its collection statute expiration date, typically 10 years from assessment. Taxpayers can propose an offer as a partial pay lump sum or in installments, and the IRS allows a partial pay installment agreement for those who can't cover their outstanding tax debt in full.

The two programs are not interchangeable: settling with the IRS does not resolve a New Jersey tax balance, and taxpayers facing both IRS and state tax debt must typically satisfy both tax authorities separately.

Administrative Appeals and Tax Court

The division also provided data on administrative appeals and Tax Court activity. Counsel Services reported 1,162 administrative appeals received in FY 2025 and 1,123 review-unit closures. Tax Court activity included 92 incoming cases and 127 closed cases in FY 2025.

The department separately provided outcome categories for appealed matters — upheld, vacated, and revised — but those totals do not match the Tax Court closed-case counts. For that reason, this article does not treat those outcome figures as Tax Court-only results. The department has been asked for clarification.

What the Data Does Not Show

The division stated that several data categories were not tracked during the requested period:

• Wage garnishments — not tracked
• Tax liens filed — not tracked
• Audit outcomes by result type — not tracked (no-change, additional assessment, refund)
• Payment plan terminations — not tracked
• Responsible person assessments — not tracked. These assessments typically require proof that an individual willfully failed to remit withheld payroll taxes to the state.

The absence of wage garnishment and tax lien data is particularly notable given the increase in other collection metrics.

What the Data Shows

The records show higher collection revenue, increased use of several enforcement tools, and a lower settlement approval rate over the four-year period.

Taxpayers facing New Jersey tax debts and back tax issues may encounter fewer resolutions through settlement and may be directed toward payment plans or face collection activity. Those with an outstanding tax balance should not assume an Offer in Compromise will be approved, should respond to collection notices promptly to avoid a bank levy or lien, and may benefit from professional tax guidance from tax professionals — including enrolled agents, CPAs, or a tax attorney — familiar with both state and federal tax resolution options. Some taxpayers with tax problems tied to financial or economic hardship may also qualify for penalty abatement, or for IRS penalty relief under reasonable cause, separate from the settlement process itself.

This article is intended to help New Jersey taxpayers make informed decisions about state tax issues using primary-source government data, not as individualized tax advice.

This article will be updated if new information becomes available.

Methodology

This article is based on data provided by the New Jersey Department of the Treasury, Government Records Access Unit, in response to public records request C255751. The data covers the New Jersey Division of Taxation Collection and Enforcement, Audit, and Counsel Services program activity during fiscal years 2021-22, 2022-23, 2023-24, and 2024-25.

Fiscal years referenced in this article run from July 1 through June 30. FY 2022 covers the period July 1, 2021, through June 30, 2022. FY 2025 covers the period July 1, 2024, through June 30, 2025.

The division confirmed that the Offer in Compromise and Settlement Agreement acceptance-rate figure represents accepted applications divided by applications received for each fiscal year. For collection activity, the division tracks the number of bank levies; other collection categories referenced in this article are drawn from the division's listed enforcement metrics in the records response. National IRS Offer in Compromise figures cited for comparison come from published IRS Data Book statistics, not from the NJ Treasury records, and are labeled accordingly.

All New Jersey figures are sourced directly from the government records response. No private or third-party data was used. Estimated approval counts are derived by multiplying the stated acceptance rate by the number of applications received and are labeled as estimates.

External Sources

• New Jersey Department of the Treasury, Division of Taxation
• Internal Revenue Service, Offer in Compromise
• Internal Revenue Service, Topic No. 204 — Offers in Compromise
• Internal Revenue Service, IRS Data Book (SOI Tax Stats)

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Author: William McLee, MBT, MBA, is an Enrolled Agent licensed to practice before the Internal Revenue Service. He is the founder of GetTaxReliefNow.com and MWB Tax Solutions. Full bio and credentials →

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