In most cases, taxpayers who owe the IRS back taxes will also continue to incur new tax obligations. This gives the IRS the ability to place additional conditions on your installment agreement or Offer in Compromise, namely that you must comply with your current tax obligations while you also work to resolve your delinquent tax debt.
Consequences of Failing to Comply
What is tax compliance? It usually comes down to two main obligations:
- File your tax returns on time.
- Make tax payments on time, including estimated tax payments or any balance due when you file a return.
If you fail to meet these requirements, your installment agreement or Offer in Compromise could go into default. You may have some flexibility with an installment agreement to renegotiate the terms and add your new debt to the balance you pay back each month. It’s best to be proactive and contact the IRS immediately if you need to change your payment plan.
Offers in Compromise aren’t as flexible. You old debt may have already been forgiven, but you’re still required to stay in tax compliance for the next five years. So, even if it’s been four years since the IRS accepted your Offer, they have the ability to rescind it and reinstate the full balance of your tax debt if you don’t file your return or pay your taxes.
How to Stay in Compliance
If you’re negotiating an installment agreement, make sure you consider your current tax obligations when figuring your monthly payment amount. You need to be able to afford your monthly payment and your current tax obligations.
File your tax return on time or request an automatic extension before tax day. Keep in mind that the IRS sometimes offsets (seizes) your tax refund while you are in the process of paying back your tax debt.
Pay estimated taxes four times a year to avoid underpayment penalties and a huge tax bill in April. You can also adjust your withholding from your wages or other income sources, if you have them.
If you sense that you’re going to miss a payment or be late filing your return, try to fix the issue as soon as possible and communicate with the IRS. Contact a tax attorney if you need help renegotiating the terms of your tax resolution agreement.
Get help with IRS tax debt by calling The Gartzman Law Firm at (770) 939-7710. We can help you avoid IRS collections and resolve your tax problems.