Federal Tax Compliance Requirements

What does the IRS require?

The IRS enforces federal tax law, which requires taxpayers to file returns, report income, and pay taxes owed. But compliance is not just about filing a return—it's about filing the correct return on time and maintaining accurate records. The IRS's actual requirements are procedurally specific, even though they're often misunderstood or overstated.

Federal tax compliance requires three core actions: filing required returns, reporting income accurately, and paying taxes owed. These obligations vary based on income level, filing status, type of income, and business structure. Understanding what the IRS actually requires is essential for determining whether you are compliant.

Filing requirements

Not everyone must file a tax return. Filing requirements are determined by gross income, filing status, age, and whether you have self-employment income. If you fall below the threshold for your filing status, you may not be required to file. However, filing may still benefit you—particularly if you had income tax withheld and are entitled to a refund, or if you qualify for tax credits.

Who must file

Single filers (under 65): Required to file if gross income is $13,850 or more (2023 tax year).

Married filing jointly (both under 65): Required to file if gross income is $27,700 or more.

Self-employed individuals: Required to file and pay self-employment tax if net self-employment income is $400 or more, regardless of other income.

Dependent status: Filing requirements are different for individuals claimed as dependents. Generally, a dependent must file if they had earned income of $13,850 or more, or unearned income of $1,150 or more (2023 amounts).

Note: These thresholds change annually with inflation adjustments. You should check current IRS requirements for the year you're asking about.

When returns must be filed

Federal income tax returns for a calendar year are due by April 15 of the following year. If April 15 falls on a weekend or holiday, the deadline moves to the next business day. The IRS does not accept "I didn't know" as a reason for filing late.

Filing extensions are available. Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) grants an automatic six-month extension. However, the extension is only for filing—not for paying taxes owed. Taxes are still due by April 15, even if you file an extension. Interest and penalties accrue on unpaid taxes from the original due date.

What "current" means

Being "current" on your taxes does not simply mean having filed a return. It means you have filed all required returns for all years the statute of limitations is open (typically the last six years), and you have paid all taxes owed or are on a valid payment plan with the IRS.

The IRS considers you not current if you have unfiled returns, unpaid taxes, or unresolved tax debt. If you are missing returns from prior years, you must file those returns (or determine you had no filing obligation) before you can be considered compliant.

A payment plan does not mean you're current if you're behind on payments. You must stay current on a payment agreement. Missing a payment on an active agreement can trigger collection action. "Current" means all filing and payment obligations are met—no outstanding balance, no unfiled returns.

Estimated tax payments

If you have income that is not subject to withholding (self-employment income, rental income, investment income, or other sources), you may be required to pay estimated quarterly taxes. Estimated taxes are due on specific dates: April 15, June 15, September 15, and January 15 of the following year.

Failure to pay estimated taxes can result in penalties and interest. If your estimated tax payments are too low, you may face an underpayment penalty even if you ultimately owe nothing or receive a refund when you file your return.

The IRS provides Form 1040-ES to help calculate estimated quarterly payments. If you're unsure whether you need to make estimated payments, a tax professional can help you determine your obligation.

Record-keeping requirements

The IRS requires you to keep records to support the information on your tax return. This includes receipts, invoices, bank statements, and documentation for deductions claimed. Records must generally be retained for at least three years from the date you file your return, but longer periods apply in certain situations.

Records you must keep:

Income documentation — W-2s, 1099s, bank statements, invoices
Deduction receipts — Invoices, receipts, statements for claimed expenses
Business records — Ledgers, journals, profit-and-loss statements
Charitable contributions — Receipts from charities, acknowledgment letters
Medical expenses — Receipts, cancelled checks, insurance statements
Mortgage and property taxes — 1098 forms, property tax statements
Asset purchases — Receipts for major purchases, renovation records

Records can be kept in physical or electronic form. Digital records are acceptable as long as they are clear and can be produced on demand.

Filing requirements for businesses

Businesses have additional compliance requirements beyond individual tax filing. The requirements vary based on business structure: sole proprietorship, partnership, S corporation, or C corporation.

Sole proprietors and partnerships must report business income on their individual tax returns (Schedule C for sole proprietors, Schedule K-1 for partners). They must also file Form 1040-ES if estimated quarterly payments are required.

Corporations file separate corporate returns: Form 1120 for C corporations, Form 1120-S for S corporations. Corporate returns must be filed by specific deadlines (usually March 15 for calendar-year corporations, unless an extension is filed).

Employers must withhold federal income tax and payroll taxes from employee wages, deposit those taxes on schedule, and file employment tax returns (Form 941 quarterly, Form 940 annually for unemployment tax). Failure to comply with payroll tax obligations results in significant penalties.

How compliance is determined

The IRS uses several methods to determine if you are compliant with your tax obligations. The primary method is reviewing IRS records to determine if you have filed all required returns and if all taxes shown as owed have been paid or are under a valid payment arrangement.

If you have been contacted by the IRS regarding unfiled returns or unpaid taxes, you are not currently compliant. Even if you believe the IRS is wrong, the existence of the contact indicates a compliance issue that must be resolved.

Compliance determination also considers the statute of limitations. The IRS can generally assess taxes for up to three years from the date a return was filed (or was due to be filed). However, the statute can be extended to six years or longer in certain situations. For compliance purposes, you should address any unfiled returns or unpaid taxes from at least the last six years.

Getting to "current" requires filing all unfiled returns, paying all known taxes owed (or establishing a payment plan), and ensuring future returns are filed on time. A tax professional can help verify your compliance status and address any outstanding issues with the IRS.