Tax Controversy & Resolution: Requesting an Appeal
Requesting an Appeal
If you disagree with the IRS's exam determination, you may request an appeal with the Office of Appeals by filing a written protest. Your protest requesting an Appeal should be completed and mailed to the IRS address specified on the letter explaining your Appeals rights. Normally, the IRS will stop collection action – (Lien, Levy and Seizure) on the tax periods Appeals is considering, unless the IRS believes the collection of the tax is at risk.
While undergoing the Appeals process it is generally more advantageous to have a tax professional (i.e. AndreTaxCo) represent you on your behalf. However, the representative must be a certified public accountant (CPA), attorney, or an enrolled agent authorized to practice before the IRS.
See publication 947, Practice before IRS and the Power of Attorney (Form 2848), for information regarding other individuals who may serve as representatives, along with a Declaration of Representative.
A formal written protest is required in all cases to request an Appeals conference, unless you qualify for the Small Case Request procedure (discussed below) or another special appeal procedure. However, if you disagree with a lien, levy, seizure, or denial or termination of an installment agreement, see Publication 1660, Collection Appeal Rights, for information on filing your protest.
How to file a Formal Written Protest
Include all of the following:
Your name, address, and a daytime telephone number.
A statement that you want to appeal the IRS findings to the Office of Appeals.
A copy of the letter you received that shows the proposed change(s).
The tax period(s) or year(s) involved.
A list of each proposed item with which you disagree.
The reason(s) you disagree with each item.
The facts that support your position on each item.
The law or authority, if any, that supports your position on each item.
The penalties of perjury statement as follows: “Under the penalties of perjury, I declare that the facts stated in this protest and any accompanying documents are true, correct, and complete to the best of my knowledge and belief.”
Your signature under the penalties of perjury statement.
If your representative prepares and signs the protest for you, the representative must substitute a declaration for the penalties of perjury statement that includes:
Confirmation of submitted the protest and any accompanying documents, and
Whether the representative has personal knowledge the facts stated in the protest, and any accompanying support, are accurate.
You must send your formal written protest within the time limit specified in the letter that offers you the right to appeal the proposed changes. Generally, the time limit is 30 days from the date of the letter.
How to file a Small Case Request
You may submit a Small Case Request if the entire amount of additional tax and penalty proposed for each tax year is $25,000 or less. For an offer-in-compromise, the entire amount for each tax period includes total unpaid tax, penalty and interest due. Note, employee plan(s), exempt organizations, S-corporations and partnerships are not eligible for Small Case Requests.
Follow the instructions in the letter you received.
Use Form 12203, Request for Appeals Review, or the form referenced in the letter to file your appeal, or prepare a brief written statement. List the disagreed item(s) and the reason(s) you disagree.
How Do I Start an IRS Tax Appeal?
A Tax Appeal can be initiated by:
Filing a Protest to the IRS findings subsequent to a Tax Audit.
Filing a Protest in the face of a tax collection action such as a tax lien or levy.
Filing a Petition to Tax Court
How Long Until the IRS Appeals Office Hears my Protest?
The Appeals Office response time varies, depending on the type of case you are appealing and the time needed to review the file before sending your case to Appeals. Normally, you can expect to hear from an Appeals employee within 90 days after you file your appeal request.
How Long Will It Take to Resolve My Case Once It’s In Appeals?
It depends on the facts and circumstances. It could take anywhere from 90 days to a year.
Recovering administrative and litigation costs
You may be able to recover your reasonable litigation and administrative costs if you are the prevailing party, and if you meet the other requirements including the requirement that the taxpayer exhaust their administrative remedies within the IRS.
Exhaustion of administrative remedies is defined as participating in an Appeals Office conference before filing a Tax Court petition or civil action for refund and extending the statute of limitations to provide the Appeals Office with reasonable time to consider the case. Additionally the taxpayer must not unreasonably delay the administrative or court proceedings.
Administrative costs include:
Costs incurred on or after the date you receive the Appeals decision letter, the date of the first letter of proposed deficiency, or the date of the notice of deficiency, whichever is earliest.
Attorney fees that generally do not exceed $125 per hour, indexed for a cost of living adjustment, are generally recoverable.
Reasonable expenses of expert witnesses, costs of studies, analyses, tests, or engineering reports that are necessary to prepare your case also may be recoverable.
Does the IRS have any grounds to void an appeals decision?
Providing false information, failure to provide all pertinent information or fraud will void an Appeals’ decision.
Could Bypassing Appeals For Tax Court Backfire?
If the Tax Court determines that your case is intended primarily to cause a delay, or that your position is frivolous or groundless, the Tax Court may award a penalty of up to $25,000 to the United States in its decision.
Do I Have Any Other Options Besides Going To Appeals Or Tax Court To Resolve My Tax Controversy?
If your claim is for a refund of any type of tax, you may take your case to your United States District Court or to the United States Court of Federal Claims. Generally, your District Court and the Court of Federal Claims hear tax cases only after you have paid the tax and filed a claim for refund with the IRS.
Appeal if IRS rejected or terminated installment agreement?
The IRS can’t levy until 30 days after the rejection or termination of your agreement. If you appeal within the 30-day period, the IRS will be prohibited from levying until your appeal is completed. However, once Appeals makes a decision regarding your case, that decision is binding on both you and the IRS and you cannot obtain judicial review of Appeals’ decision following a CAP hearing.
What are the main advantages of filing an Appeal?
According to the IRS’s own statistics, appeals on average result in a tax bill that’s notably lower than the amount originally proposed. IRS Appeals Officers are hired to settle cases and their performance is evaluated by how quickly they close appeals cases, not on how much revenue they manage to generate. IRS statistics show that a majority of appeals cases are settled in a way that’s satisfactory to the taxpayer making the appeal.
The main advantage of filing an appeal is that it gives the taxpayer a chance to resolve the case without the expense of litigation. A taxpayer or his representative may discuss and negotiate a case informally with the Appeals officer rather than in the stricter adversarial arena of a docketed case in Tax Court. Moreover, the rules of evidence are not adhered to in Appeals. A taxpayer may thus provide information in support of his position that would not be admissible at trial. For example, affidavits and documents may be submitted in lieu of the live (and often expensive) testimony of witnesses who are subject to cross-examination.
Requesting an appeals conference preserves the taxpayer’s rights to receive reasonable litigation costs. The appeals process also delays payment of the amounts at issue. The IRS will delay issuing a notice of deficiency if a case is in Appeals, provided sufficient time remains before expiration of the statute of limitations.
Filing an Appeal vs. proceeding straight to Tax Court
An administrative appeal is not risk free. In addition to finding more support for a revenue agent’s adjustment, it is possible that an Appeals officer may raise new issues. However, new issues are not to be raised unless the ground for such action is substantial and the potential effect on tax liability is material. Also, new issues cannot be raised for bargaining purposes.
Nevertheless, it is somewhat more likely that a new issue will be raised by an Appeals officer than by District Counsel where a taxpayer chooses to go to Tax Court.
If the Appeals officer does raise a new issue in a nondocketed case, the burden of proof is on the taxpayer, whereas the burden is on the IRS for any new issue raised in its answer to the Tax Court petition.
Failed to Respond to Notice of Deficiency within 90 Days?
If you do not file a petition in Tax Court within 90 days, the proposed tax changes, interest, and penalties become assessed and owed whether or not the IRS was incorrect in proposing the assessment.
When is it not appropriate to appeal an IRS action?
Appeals is not for you if:
Your only concern is that you cannot afford to pay the amount you owe.
The correspondence you received from the IRS was a bill and there was no mention of Appeals.
What to do if I don’t agree with the IRS audit results?
If you don’t agree with any or all of the IRS findings given you, you may request a meeting or a telephone conference with the supervisor of the person who issued the findings. If you still don’t agree, you should seriously consider appealing your case to the Appeals Office of IRS.
How to appeal a collection action instituted by IRS
You may appeal many IRS collection actions to the IRS Office of Appeals (Appeals). The two main procedures are Collection Due Process (CDP) and Collection Appeals Program (CAP).
Collection Appeals Program (CAP) is available for the following actions:
Before or after the IRS files a Notice of Federal Tax Lien.
Before or after the IRS levies or seizes your property.
Termination of an installment agreement.
Rejection of an installment agreement.
However, you can’t go to court if you disagree with the CAP decision.
Collection Due Process (CDP) – By law, you have the right to a CDP hearing by Appeals
The first time a Notice of Federal Tax Lien is filed for a tax and period.
Before the first levy on your property for a tax and period.
After levy on your state refund.
After levy when collection is in jeopardy.
Can't Reach an Agreement with the IRS Office of Appeals?
In most instances, you may be eligible to take your case to Tax Court if you don’t reach an agreement at your Appeals conference, or if you don’t want to appeal your case to the IRS Office of Appeals.
If your disagreement with the IRS is over whether you owe additional income tax, estate tax, gift tax, certain excise taxes or penalties related to these proposed liabilities, you can go to the United States Tax Court. You can do this after the IRS issues a formal letter, stating the amounts that the IRS believes you owe. This letter is called a notice of deficiency.
You have 90 days from the date this notice is mailed to you to file a petition with the Tax Court (or 150 days if the notice is addressed to you outside the United States).
The last date to file your petition will be entered on the notice of deficiency issued to you by the IRS. If you don’t file the petition within the 90-day period (or 150 days, as the case may be), the IRS will assess the proposed liability and send you a bill.
If you don’t choose to go to the IRS Appeals Office before going to court, normally you will have an opportunity to attempt settlement with Appeals before your trial date.
What types of IRS collection actions can be appealed?
Almost any collection action taken by the IRS can be appealed including:
Rejection of an Offer in Compromise.
Rejection of an Installment Agreement.
Proposed Trust Fund Recovery Penalty.
Denied request to abate penalties (i.e., late payment, late filing, or deposit penalties).
How to Know if it’s Time To Request an Appeals Conference
You are ready to request an Appeals conference or hearing if you can explain why you disagree.
Valid grounds for disagreement with an IRS finding can be based on misapplication of tax law, misapplication of the underlying facts in your matter or the taking of an improper action by the IRS.