When navigating a dispute with the IRS, one of the best moves you can make is taking your case to the Office of Appeals. It’s a chance to resolve disagreements without the expense and stress of court. However, one critical factor that can greatly influence the success of your appeal is your level of tax compliance. Maintaining compliance isn’t just about filing returns—it’s about showing the IRS that you’re serious about resolving your tax matters fairly.
Why Tax Compliance Matters
The IRS is more likely to negotiate with taxpayers with a history of complying with tax obligations. Being up to date with your filings and payments signals that you’re acting in good faith, which can work in your favor during the Appeals process. Conversely, if you have a history of non-compliance, it can be a major obstacle. Even if you have a legitimate argument, non-compliance can make the IRS less willing to work with you.
What Does “Being in Compliance” Mean?
For IRS purposes, compliance usually means that you’ve filed all required tax returns for at least six years. The IRS uses this key benchmark to assess whether you’re meeting your obligations. So, if you’re missing returns from earlier years, they generally won’t be a problem as long as the most recent six years are fully filed.
Being in compliance also means you’re making any required tax payments on time, including estimated payments if you’re self-employed. Even if you can’t pay off everything you owe, showing a commitment to keeping current with new obligations can help your case.
Compliance in Collection Appeals
Your current compliance status is even more critical if your appeal involves collection actions—like disputing a lien or levy. The IRS is less likely to grant relief if you still miss recent tax returns or fail to make payments on time. In fact, the IRS often views non-compliance as a sign that the appeal is more about delaying collections than resolving the dispute.
Compliance is non-negotiable for taxpayers seeking relief through an Offer in Compromise or Currently Not Collectible (CNC) status. The IRS will not even consider these options unless you’re fully current with your tax filings for the past six years.
How to Get Compliant Before Appeals
If you’re not currently compliant, here are some steps you can take before your Appeals conference:
- File Any Outstanding Tax Returns for the Past Six Years: Even if you can’t pay the full amount owed, it’s crucial to file all required returns.
- Set Up a Payment Plan: If you owe back taxes, consider entering into an installment agreement. Showing that you’re working toward paying your tax debt helps demonstrate good faith.
- Make Your Estimated Payments: If you’re required to make estimated payments, ensure they are current. This is especially important for self-employed individuals.
Final Thoughts
Tax compliance is key in determining how the IRS Appeals Office approaches your case. The goal of Appeals is to reach a fair settlement, but your compliance history plays a big role in building trust and credibility. By ensuring you’re fully compliant with your tax filings for the last six years and staying on top of current obligations, you’ll put yourself in a much stronger position to achieve a favorable outcome.
