Filing an offer in compromise is a great way to reduce your back taxes with the IRS and you should be happy if you are successful with your offer. However, did you know that if you don’t keep up with your tax filing obligations, the OIC will be revoked?

Occasionally I have a situation with a client who had an offer in compromise accepted by the IRS, but six months later my client is not keeping up with their IRS tax filing obligations. The OIC is then terminated by the government and my client is responsible for the full amount of back taxes.

So what does it mean to keep up with the IRS? It means that two years after acceptance of the offer, the taxpayer files all tax returns before the due date of the tax return. If a return is not filed by the due date, an extension must be filed. For example, the 1040 is due on April 15, if the taxpayer does not file their 1040 by the 15th, then they must file the extension by the 15th. If the taxpayer files their extension on April 17, then the taxpayer will not be keeps up to date.

If the taxpayer is self-employed and is required to make quarterly estimated tax payments to the IRS, then the taxpayer must make those payments or is not current. During any calendar year, quarterly estimated tax payments are due on April 15, June 15, September 15, and January 15. If one of these is lost, then the taxpayer is not considered current.

Keeping up with the Internal Revenue Service also means staying up to date with paying the IRS, not just filing tax returns. For example, John files his 1040 form on April 1 and owes the government $4,000 with this tax return. John only has $2,000 in his bank account, so he only sends a check for $2,000 to the IRS and still owes the government $2,000. If John does not pay the $2,000 by April 15, he will be considered not current on his tax obligations and the IRS may revoke his OIC.

There are many important details and elements to consider when preparing an offer in compromise, and making sure a taxpayer stays current within the two-year period is just as important.

A taxpayer should seek professional assistance from an experienced professional when dealing with the IRS.