What is Compliance And Why Is It Important?
By Steven A Leahy
When I meet with new clients I often begin our discussion on how our office goes about resolving tax issues by writing “Compliance” at the top of the screen in BIG letters. Compliance, to the IRS, means complying with all tax obligations – payment compliance; filing compliance; and reporting compliance. Filing compliance refers to filing of tax returns. Reporting compliance refers to accuracy of the filing. Finally, payment compliance refers to the payment of the reported taxes.
In order to resolve a tax problem the taxpayer must be in filing compliance. In addition, if the taxpayer is a 1099 employee or self-employed, the taxpayer must be in payment compliance, at least for the current year. That means that any unfiled returns must be filed, and any quarterly payments must be paid, before the IRS will agree to stop any collection efforts. The IRS will generally begin collection efforts by sending notices, applying a previous tax year’s refund to tax due, filing liens and, finally, seizing your property and assets.
If a taxpayer receives a Notice of Levy on Wages, Salary, and Other Income and has unfiled returns and/or unpaid quarterly payments, it will be very difficult to stop the levy before the taxpayer can get into compliance. That is why it is so important to work to resolve your tax problems before levies are issued. If you ever receive Form CP 297 – Notice of Intent to Levy and Notice of Your Right to a Hearing you need to act immediately – that may be your last chance. So, OPEN ALL MAIL YOU RECEIVE FROM THE IRS.
The Notice of Intent to Levy and Notice of Your Right to a Hearing is a form that alerts the taxpayer that the IRS intends to begin taking assets from them – normally it begins with bank accounts and wages. The notice will include the balance due, and the taxpayer’s right to appeal that action. You must request an appeal (Collection Due Process) within 30 days from the date of the Notice of Intent to Levy and Notice of Your Right to a Hearing. If the appeal is filed within the 30 days, IRS collection efforts are stopped while the appeal is pending. The appeal will give the taxpayer an opportunity to get into compliance and work out a resolution with the IRS.
Compliance is also important once a resolution has been reached. If a taxpayer is granted an Installment Agreement, Offer in Compromise or Currently Not Collectible status, part of the agreement between the IRS and the taxpayer is for the taxpayer to remain in compliance with all tax obligations going forward. That means the taxpayer can’t be late filing future returns – an extension is NOT compliance – all taxes must be paid in a timely manner. The tax reported on your tax return and all quarterly payments must be paid as they come due. If a taxpayer defaults on that agreement, the IRS will cancel the agreement and begin collection efforts again, taking the taxpayer right back where they left off.
So, if you are facing IRS problems, you should work with a local law firm that will work to get you in compliance with IRS tax obligations AND help you stay in compliance after you reach a resolution. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.