IRS Compliance Before Collection Alternatives

Filing season may be over, but the IRS account is still moving.

A return enters processing. Balances are posted. Payments are applied. Notices are generated. Matching systems compare what was filed against third party records. Collection alternatives do not become available just because a taxpayer owes and wants relief.

The IRS looks first at compliance.

That means filed returns.

That means current year payments.

That means no new balance being created while the taxpayer asks for help with the old one.

Now that your return has been filed, the next set of decisions begins. Before IRS processing or planning opportunities are missed, speak with Steve Perry, EA about your situation. Call 678-717-9818, email [email protected], or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.

Collection Alternatives Start With Compliance

Taxpayers often think the first question is which IRS program fits the debt.

That is not the first question.

The first question is whether the taxpayer is compliant enough for the IRS to consider the option.

Collection alternatives include installment agreements, currently not collectible status, offers in compromise, collection appeals and other account resolutions. Each option has different rules, but most depend on the same foundation.

The IRS wants to know:

• Are required returns filed?
• Are current year estimated payments being made?
• Is withholding corrected?
• Are business deposits current?
• Is the taxpayer creating another balance?
• Are IRS notices being answered?
• Is the financial information current and supportable?

Without compliance, the IRS generally does not move to the real resolution discussion. Currently not collectible status is the primary exception because financial hardship can justify suspending collection before return compliance has been completed.

Missing Returns Block Most Collection Discussions

A taxpayer cannot ask the IRS to approve most collection alternatives while required returns remain unfiled.

The IRS account is incomplete.

Missing returns mean the IRS does not know the full liability. It does not know whether additional balances exist. It does not know whether Substitute for Return assessments need correction. It does not know whether the taxpayer is participating in the system.

That blocks most collection alternatives.

The IRS will require the taxpayer to file required returns before approving payment plans, offers and many negotiated resolutions.

This does not mean every missing year is automatically filed without analysis.

It means the taxpayer must determine which years are required, which years protect the taxpayer and which years affect resolution.

Compliance is not a paperwork exercise.

It is the entry point into IRS resolution.

Current Year Compliance Matters as Much as Old Returns

Filing old returns is not enough.

The taxpayer must also be current now.

If a taxpayer owes for prior years and is still underwithheld this year, the IRS sees the next balance forming. If a business owes payroll taxes and current deposits are not being made, the IRS sees the same problem continuing.

The IRS does not approve most resolutions so the taxpayer can create another debt.

Current compliance means:

• Wages have proper withholding
• Self employed taxpayers make required estimated payments
• Business taxpayers make current payroll deposits
• Current year bookkeeping is being maintained
• New income sources are being addressed
• IRS notices are being opened and handled

A taxpayer who ignores the current year weakens every collection alternative.

If you are unsure what happens next after filing or whether your return could trigger IRS correspondence, speak with Steve Perry, EA to review your position. Call 678-717-9818, email [email protected], or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.

Installment Agreements Require Compliance

An installment agreement is not simply a request to pay monthly.

It is an agreement with the IRS based on the taxpayer’s account status and ability to pay.

Before approval, the IRS requires current returns to be filed and current deposits or estimated payments to be handled. Once the agreement is approved, the taxpayer must stay compliant. A new balance can default the agreement.

That is why the payment amount is not the only issue.

The taxpayer must answer:

• Are all required returns filed?
• Is the current year protected from another balance?
• Can the proposed payment be made every month?
• Will the taxpayer remain compliant during the agreement?
• Is the payment amount consistent with the taxpayer’s ability to pay?

A payment plan that ignores current compliance is unstable from the beginning.

Currently Not Collectible Status Requires Financial Proof

Currently not collectible status is not a collection tool for the IRS.

It is a status that suspends most collection activity because the taxpayer cannot pay after necessary living expenses are considered.

The balance does not disappear.

Penalties and interest continue.

Liens remain possible.

The IRS requires financial information before placing an account in CNC status. That information must be current, complete and supported. The taxpayer must show that collection would create financial hardship.

Unlike most collection alternatives, CNC can be approved before all required returns have been filed. Missing returns still need to be addressed, but they do not automatically prevent CNC when the financial facts support hardship.

Offers in Compromise Have Strict Compliance Requirements

An offer in compromise is not available just because a taxpayer owes more than can be paid comfortably.

The IRS requires eligibility before it considers the offer.

That includes filed required returns and required estimated payments. Business taxpayers with employees must also be current with required federal tax deposits for the relevant period before applying.

The IRS also monitors compliance after an offer is accepted.

That matters.

An offer is not only about reducing an old balance. It is also about proving the taxpayer can stay compliant after the deal is made.

A taxpayer who is still creating new balances is not ready for an offer.

Collection Appeals Still Require a Complete Account Strategy

Collection appeals can be powerful when the IRS has issued a levy notice, filed a lien, or moved the account toward enforcement.

But appeals do not replace compliance.

An appeal can challenge the timing, appropriateness, or proposed collection action. It can also raise collection alternatives. Most collection alternatives raised during an appeal require return compliance before they can be approved.

The IRS will not ignore missing returns simply because the taxpayer appealed.

The stronger appeal is built on:

• Correct account transcripts
• Filed required returns when the requested alternative requires them
• Current year compliance
• Accurate financial information
• A realistic alternative to enforcement
• Documentation supporting the taxpayer’s position

Appeals work best when the taxpayer brings a complete record and a practical resolution.

Before assuming your tax situation is complete for the year, consider having Steve Perry, EA evaluate your next steps and planning opportunities. Call 678-717-9818, email [email protected], or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.

The IRS Looks at Behavior After Filing

The return is not the final event.

It is the start of IRS processing, matching, billing and possible enforcement sequencing.

After filing, the taxpayer’s behavior matters.

The IRS looks at whether the taxpayer:

• Opens notices
• Responds before deadlines pass
• Files required returns
• Makes current year payments
• Keeps business deposits current
• Avoids new balances
• Provides financial information when requested
• Proposes a resolution that fits the facts

This is why post filing season is a critical window.

The taxpayer can still correct withholding.

The taxpayer can still set estimated payments.

The taxpayer can still organize records.

The taxpayer can still respond before the account escalates.

Waiting gives the IRS system more control.

Compliance Creates Leverage

Compliance does not make the balance disappear.

It creates the conditions for negotiation, review and resolution.

A compliant taxpayer is easier to defend because the account has structure. The IRS can see filed returns. The current year is being handled. The taxpayer is not asking for relief while repeating the same problem.

That matters when requesting:

• Time to pay
• A payment based on ability to pay
• CNC status
• Penalty relief
• An offer in compromise
• Levy release
• Lien review
• Collection appeal consideration

Compliance gives the taxpayer a stronger position.

Noncompliance gives the IRS an easy reason to say no to most collection alternatives.

Common Mistakes That Delay Collection Alternatives

Taxpayers often delay their own relief without realizing it.

Common mistakes include:

• Asking for a payment plan while returns are missing
• Assuming every collection alternative has the same compliance requirements
• Pursuing an offer while current estimated payments are not made
• Ignoring current year withholding
• Leaving payroll deposits unpaid
• Treating IRS notices as optional
• Filing old returns without checking transcripts
• Creating a new balance while trying to resolve old debt
• Assuming a representative can negotiate around missing compliance

These mistakes waste time.

They also give the IRS more control over the account.

The Better Approach

The better approach is direct.

First, identify required missing returns.

Second, pull IRS transcripts.

Third, correct SFR assessments when needed.

Fourth, file the required returns in the right order.

Fifth, correct current year withholding or estimated payments.

Sixth, bring business deposits current.

Seventh, gather financial records.

Eighth, select the collection alternative that fits the taxpayer’s ability to pay.

Ninth, respond to IRS notices before enforcement escalates.

That sequence moves the taxpayer from reaction to resolution.

Final Thought

Most collection alternatives do not become available because a taxpayer wants relief.

They become available when the taxpayer has built the compliance foundation needed for the IRS to consider relief. Required returns must be filed. Current year payments must be addressed. Business deposits must be current. Financial information must be supportable. New balances must be prevented.

Filing season may be over, but IRS processing, matching, billing and enforcement sequencing continue after submission. Many IRS problems grow not from the filing alone, but from what taxpayers fail to do after filing.

After filing season ends, many taxpayers miss critical planning windows that affect next year’s outcome. If you want to stay ahead of the process, speak with Steve Perry, EA now. Call 678-717-9818, email [email protected], or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.

FAQ

What does IRS compliance mean before collection alternatives?

IRS compliance means required returns are filed, current year payments are being handled, business deposits are current when applicable and the taxpayer is not creating a new balance.

Can I get an installment agreement if I have missing returns?

No meaningful installment agreement will move forward while required returns are missing. The IRS requires current returns filed and current deposits paid before approval.

Can I request currently not collectible status if I have unfiled returns?

Yes. CNC is different from most collection alternatives. If financial facts show collection would create hardship, the IRS can approve CNC before all required returns have been filed. Missing returns still need to be addressed.

Can I submit an offer in compromise before becoming compliant?

No. OIC eligibility requires filed required returns and required estimated payments. Business taxpayers must also be current with required federal tax deposits.

Why does current year compliance matter?

Current year compliance prevents a new balance from forming. The IRS will not approve most resolutions while the taxpayer is repeating the same tax problem.