If you have unfiled returns or are in collection proceedings with the Internal Revenue Service, a central condition for resolving your issues is being "compliant.” So what does the IRS consider compliant? The term is not defined in the Internal Revenue Code, but it is defined in the Internal Revenue Manual as:
“Compliant - Tax compliance is the accurate and timely filing of all required tax returns and the timely payment of all tax liabilities. A compliant result is determined when tax records reflect there is no record of an overdue tax return or unpaid tax debt.” - Internal Revenue Manual, 25.29.1.1.6. 1. 1. 6. 1. 1. 6 (09- 02- 2025) - Terms and Acronyms
Why is this important? The IRS wants to see that you' re not creating new tax debt while resolving old debt.
Filing compliance means all required tax returns have been submitted to the IRS. This is a requirement for any resolution program.
The IRS generally requires at least the last 6 years of returns to be filed (6- year rule).
Unfiled returns or unpaid installment agreements can prevent new installment agreements, Offers in Compromise(OIC), and Currently Not Collectible (CNC) status.
Filing a return is better than not filing — the failure- to- file penalty is 5% of the tax due for each month or part of a month the return is not filed. In addition, the IRS can file a “substitute” return for you. This is a return filed on your behalf, and the IRS will use the information on the return to calculate your tax liability. Further, the statute of limitations never expires on an unfiled return.
Payment compliance means current- year tax obligations are being met through withholding, estimated payments, or a combination of both.
If you are employed, ensure your Form W-4 withholding is adequate.
If you are self-employed, quarterly estimated payments are required.
Current/future compliance means you are meeting your tax obligations on time.
Stay current on all future filings — one missed return or payment can jeopardize an active resolution.
Make agreed-upon payments on time if you are in an installment agreement.
Report changes in financial circumstances that could affect your current arrangement/agreement.
Respond to IRS correspondence promptly.
Compliance is the foundation of all resolution strategies. The IRS will work with taxpayers who demonstrate good faith through consistent filing and payment. Breaking compliance after entering a resolution agrremnt can result in default, reactivation of collections, and voiding previously negotiated agreements.