If you have outstanding federal tax debt, the IRS wants to see that you fully comply with your current tax filings and payment obligations. Demonstrating a renewed commitment to tax compliance is essential for resolving old debts favorably.

The IRS’s primary concern in collections cases is ensuring you won’t fall behind again on current and future taxes while paying off an old balance. After all, letting new liabilities accrue defeats the purpose of finally paying off past debts. Tax compliance reassures the IRS that you are getting and staying current.

Being tax compliant means:

• Filing all required returns on time
• Paying any current taxes owed in full when filing
• Making all required estimated tax payments if you have income not subject to withholding

When you meet these obligations for a period of time, the IRS is much more amenable to allowing you to pay old debts through an installment plan, accepting an Offer in Compromise to settle for less than owed, or even providing temporary relief from collections until your financial situation improves.

On the other hand, a lack of tax compliance while trying to resolve an existing debt is a red flag for the IRS. If you aren’t paying current taxes, they have little incentive to go easy on the past amounts you owe. The collections process tends to stall or become much more problematic if new delinquencies keep accruing.

Maintaining tax compliance also strengthens your negotiating position with the IRS. You can leverage your pattern of staying current to request lower user fees, penalty abatements, longer installment timelines, or a reduced offer amount. The IRS judges your future compliance risk, in part, based on how responsibly you meet your ongoing tax obligations.

At the end of the day, the IRS wants to see you value compliance and remain diligent about fulfilling your annual tax responsibilities going forward. Doing so builds trust and makes the IRS more willing to work with you to resolve old debts through affordable payments or settlement options. Tax compliance is the foundation for controlling your overall tax situation.

If you need help resolving your tax debt, schedule a call with me today.