Appealing an Audit
Article by: Sherrie Bennett
If you can't stomach the tax bill you receive after an IRS audit, you may want to appeal to the IRS for a second look.
So many taxpayers are able to downsize the amount of taxes, interest and penalties owed by appealing that IRS agents grudgingly refer to the internal appeals process as the "gift shop."
A potential downside to appealing is that an appeals officer can uncover issues missed by the initial auditor, exposing you to a bigger tax bill than when you started. Although this rarely happens, if you're worried about it, you might want to skip the internal IRS appeals process and go straight to federal Tax Court.
IRS appeals agents are entirely independent of the opinions and conclusions of audit agents, and have a lot of discretion in looking over audits.
Writing A Protest Letter
To appeal an audit within the IRS, you must file what's called a "protest letter" within 30 days of the date of the letter and examination report assessing the taxes due. The protest letter should include:
- Identifying information such as your name, address and phone number
- A statement that you wish to appeal the IRS findings
- A copy of the letter detailing the findings you're appealing
- The tax years involved
- What specific conclusions you disagree with and why
- The facts supporting your position
- The tax law on the issue
If the amount the IRS says you owe is $25,000 or less for any particular tax year, you can make what's called a "small case request" instead of filing a formal protest. This request, although processed more informally, still must be in writing and made with 30 days of the date of the letter determining you owe taxes.
If you decide to hire a lawyer to represent you in the appeal process, your lawyer must be qualified to practice before the IRS and you must sign what's called a "power of attorney" authorizing your lawyer to access confidential information at the IRS.
What to Expect in Appeal Negotiations
Appeal negotiations may occur in person or by mail, and are informal.
An appeals officer is authorized to settle a dispute based on what the IRS calls the "hazards of litigation." This means you'll be more likely to get your tax bill lowered if you can convince the agent there's a significant chance the IRS may lose if the matter goes to Tax Court. The IRS considers:
- The specific facts of your case
- The likelihood of both you and the IRS being able to prove the f acts at a trial
- The strength of your legal arguments
- The practical realities of litigating the particular issue in court
The agent looks at negotiating the specific issues involved, rather than entertaining a reduction of the overall tax bill.
If you reach an agreement, the appeal agent will prepare an agreement called a "stipulation" and you can then discuss how you'll pay whatever amounts are left owing.
If you can't reach an agreement with the appeals officer, you can appeal the audit results to the federal Tax Court.
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