When taxpayer’s come into our Richardson, TX tax office, one of the biggest challenges I often have is getting them into tax compliance. Today, we’ll discuss what Tax Compliance means to the IRS and why it’s critical to effectively resolving your tax debt.
What Does the IRS Consider Tax Compliance?
In general, it means that all tax returns are filed and current taxes withheld are accurate. While under law, all tax returns must be filed, IRS policy under IRM 1.2.14.1.18 is to require the filing of the last six years. Generally, the IRS will not require filings older than 6 years. For the current tax year:
- If the Taxpayer is an employee, their withholding must be properly withheld to pay the current period taxes,
- If the taxpayer is self-employed, proper Estimated Tax payments must have been made, and
- If an employer with payroll tax issues, all payroll tax deposits must be made.
Why is Tax Compliance Important?
If a Taxpayer is not in Tax Compliance, the IRS will not consider an Offer-In-Compromise nor will they consider any type of installment agreement. It actually makes a lot of sense. When the IRS enters into an agreement with a Taxpayer, they want to provide a complete and full resolution to the Taxpayer’s problems. The taxpayer most likely wants the same. An Offer-In-Compromise or Installment Agreement can be a time consuming, costly, and stressful process. A Taxpayer normally doesn’t want to have to go through same process in a few months.
If I am representing a taxpayer who is not compliant in the current tax year and is unable to get compliant, I will typically advise them to wait until the year is finalized and get the tax assessed and added to the Offer or Installment Agreement. The one resolution that I work with taxpayer’s on related to IRS debt that does not require tax compliance is Current-Not-Collectible Status.
It is also important to remain in tax compliance once an agreement is made. Falling out of compliance may void an Offer-In-Compromise or Installment agreement. As mentioned above, getting into and remaining in tax compliance is often a major challenge with clients.
Do You Need Help?
If you need help with any IRS Audit or Collection issue, I’d be happy to talk with you. Please give me a call at (972) 821-1991 or email me at bob@jablonskyandassociates.
