The IRS defines compliance as the obligation taxpayers have to report income, file all returns, and generally staying up to date on their taxes, such as paying federal tax deposits and payments.  Although the definition of compliance is simple enough, the necessities vary with each taxpayer, as no individual’s tax obligations are the same.

Failure to file a tax return and then Filing it:

Before negotiating an IRS tax resolution with a taxpayer, the IRS requires the taxpayer seek compliance with the IRS, meaning that all requisite tax returns be filed.  The taxpayer then, has two options.  He/she may either: file the missing tax returns, thereby being in compliance with the IRS, or not file them.  In most cases, this choice boils down to either: the easy way, or the hard way.  This essay provides information regarding the ’easy way’.

To file the requisite tax returns, the individual will need to provide the IRS with all pertinent information, including number of dependents, income, adjustments, deductions, etc.  The disadvantages of this option include: 1) The information ceded to the IRS can possibly lead to additional liabilities; 2) the late-filing penalty may be applied; and 3) In the event that a tax liability has continued from previous years, any refunds the taxpayer could receive for the tax year could be forfeit.

On the other hand, filing missed returns makes the taxpayer achieve compliance status, allowing the individual to proceed with IRS tax resolution, for example, by pursuing an Offer in Compromise, seeking an Installation Agreement, or seeking a status change to Currently not Collectible (CNC).  Additionally, compliance allows the individual to address any forthcoming collection methods, such as IRS bank or property levies.