The IRS requires that a business has filed all overdue tax returns in order to gain compliance status.  For corporations, that means filing all overdue or absent 1120 tax returns.  For partnerships, that means 1065s and for businesses with employees, 940s and 941s.

The 940s and 941s are usually considered the most difficult of these to stay up-to-date on.  For each quarter that a business had its first employee to the quarter in which they have their last, they are required to file one 941, and if there are periods during that time period when the business has no employees, it is still required to file a payroll return.  941s allow for a business to communicate to the IRS that the business will no longer have employees, after which point, 941s become unnecessary.  Tax return 940 operates under the same rules; however, they are only filed once per year.

The final stipulation for compliance is that any business remain up-to-date with its current payroll deposit requirement.  In fact, before a business can pursue IRS tax resolution, it usually must stay in compliance two or more quarters.  As a business facing a potential IRS collections action, it is important to either be in compliance status or know how to gain compliance status.

Any person who is called to provide information to the IRS, whether it be via records or oral testimony, is granted certain rights they may employ in their defense.  These rights include the Fifth Amendment Right against self-incrimination.  The Fifth Amendment grants that no one may be forced to give testimony as a witness against themselves.  It is important to note that information given voluntarily by the individual can be used to incriminate them, so the right can only be invoked to protect against an individual sharing testimony, not after the testimony has been given.

Any person who is called to provide information to the IRS is granted the right to an attorney, which includes the opportunity to hire one.  In addition to this right, any person appearing for an IRS Summons is given attorney-client privileges, or those of tax practitioner-client, wife-husband, or penitent-clergy.

Other powers granted the liable party include the right to create an audio recording of the meeting, as well as the right to ask to withhold a 3rd-party IRS Summons.  There are a number of more specific guidelines for the execution of this right, so under most circumstances, it would be advisable to seek the advice of an attorney to determine whether the exercise of this right could potentially aid the taxpayer.

Lastly, any third party summoned to the proceedings retains the right to opt not to comply with any unreasonable Summons and defend themselves from doing so accordingly.  Again, consult an attorney, whether the taxpayer under investigation or a third party, and you believe you may have been Summoned unreasonably.

Whenever a taxpayer has a back tax problem, they must make sure that they deal with it right away. The first IRS program that many people go to is the Offer in Compromise program. But considering that approximately 85% of taxpayers with back tax issues do not qualify for an offer in compromise, negotiating an installment agreement may be the next best thing.

The installment agreement process is much easier to complete than an offer in compromise. The installment agreement allows the IRS to set a monthly payment plan with the taxpayer that is determined by examining the taxpayer’s liability and comparing that to how much they can afford to pay on a monthly basis.

Installment payments must be paid timely and to the proper address. Don’t fall behind on your installment payments, as this is an agreement between you and the IRS. If you don’t fulfill your end of the agreement the IRS will instigate collection procedures again. It will be more challenging to negotiate an agreement the next time.

Just make sure that before you initiate an agreement you make sure that you are current on all income tax filings. The IRS will certainly make this a condition of the agreement and you won’t have much of a choice in the matter.

By aggressively negotiating with the IRS and working diligently, most taxpayers with back tax issues can reach an installment agreement. The goal is to make sure that you get an agreement that works within your financial budget.