They say you can’t fight City Hall, but you can challenge an IRS decision.
The Taxpayer Bill of Rights (TBOR), the cornerstone document outlining fundamental protections for taxpayers, explicitly includes the Right to Appeal an IRS Decision in an Independent Forum.
As the IRS explains, “Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.”
Taxpayers make use of this right. According to the Federal Bar Association, the IRS Independent Office of Appeals has historically closed more than 100,000 cases annually for many years, reflecting how frequently audit findings and other IRS determinations are challenged.
Understanding how the appeals process works, when a case can move to the U.S. Tax Court, and why professional representation can make a critical difference can help taxpayers protect their financial interests and avoid costly mistakes.
When You Can Appeal an Audit Decision
The IRS recognizes that taxpayers may disagree with audit findings, which is why a formal appeals process exists.
In general, you may request an appeal if you:
- Received a letter from the IRS explaining your appeal rights.
- Disagree with the IRS proposed changes or penalties.
- Have not signed an agreement accepting IRS’s findings.
Before filing, taxpayers should carefully review the facts, applicable tax law, and any supporting documentation that strengthens their position.
To request an Appeals conference, you must submit a written protest to the IRS office listed in your letter within the specified deadline. The Appeals officer assigned to your case will rely on this protest to understand the dispute and prepare for the conference.
Appeals requests generally fall into two categories based on the amount at issue:
- Small Case Request (total tax and penalties of $25,000 or less per tax period)
- Formal Written Protest (more than $25,000 or certain case types regardless of amount)
Small Case Request
For smaller disputes, the process is simplified.
You may submit either:
Although simpler, the request should still clearly explain your position and include relevant supporting facts.
Formal Written Protest
A formal written protest is required for:
- Cases involving more than $25,000 in tax and penalties per tax period.
- Employee plan and exempt organization cases (regardless of amount).
- Partnership and S corporation cases (regardless of amount).
- Other matters that do not qualify for small case procedures.
- Your name, address, and daytime telephone number.
- The tax years or periods involved.
- A list of disputed issues and proposed changes.
- The reasons you disagree with each issue.
- Facts supporting your position.
- Applicable law or authority supporting your argument, if available.
A formal protest must explicitly state that you want to appeal the IRS’s proposed changes and should include detailed information, such as:
You must also include a signed declaration under penalties of perjury stating:
“Under penalties of perjury, I declare to the best of my knowledge and belief, the information contained in this protest and accompanying documents is true, correct, and complete.”
If a representative prepares the protest, they may need to include a statement regarding whether they have personal knowledge of the facts.
The IRS Independent Office of Appeals
The IRS Independent Office of Appeals serves as a neutral forum designed to resolve tax disputes without litigation. Although it operates within the IRS, Appeals is separate from the auditors who conducted the examination and is tasked with reviewing cases impartially.
During an Appeals conference, the assigned officer evaluates both the taxpayer’s position and the government’s case, considering the applicable law as well as the potential risks of litigation for both sides. Conferences may take place by phone, video, correspondence, or in person, depending on the complexity of the case.
Many disputes are resolved at this stage through negotiation or compromise. Reaching agreement can save significant time, expense, and uncertainty compared with taking a case to court. However, if no resolution is reached, the IRS may proceed with formal assessment actions.
The Notice of Deficiency: A Critical Turning Point
If the dispute remains unresolved, the IRS may issue a Notice of Deficiency, often called a “90-day letter.” This formal notice outlines the IRS’s determination of additional tax owed and provides the taxpayer with the legal right to challenge that determination in court.
The deadline in this notice is strict. Taxpayers generally have 90 days from the date of the letter (150 days if outside the United States) to file a petition with the U.S. Tax Court. Missing this deadline typically means losing the ability to contest the liability in Tax Court without first paying the tax.
Because of the high stakes and limited timeframe, prompt action is essential.
Taking Your Case to U.S. Tax Court
The U.S. Tax Court is an independent federal court that specializes in resolving tax disputes between taxpayers and the IRS. One of its most significant advantages is that taxpayers generally do not have to pay the disputed tax before filing a petition.
Tax Court proceedings are formal legal matters. They may involve discovery, motions, written briefs, and potentially a trial before a judge. While some cases proceed to a decision, many are settled before trial through negotiations between the taxpayer and IRS counsel.
Litigation can be complex, time-consuming, and costly, but it may be necessary when substantial amounts are at stake or when important legal principles are involved.
Why Professional Representation Matters
Appealing an IRS audit decision involves more than simply disagreeing with the government’s findings. Success often depends on presenting a well-supported legal and factual argument, understanding procedural requirements, and negotiating strategically.
Experienced tax counsel can help:
- Evaluate the strength of your case.
- Prepare persuasive submissions and evidence.
- Communicate effectively with Appeals officers.
- Protect your rights during negotiations.
- Navigate Tax Court procedures if litigation becomes necessary.
Early guidance can also help taxpayers avoid mistakes that could weaken their position or eliminate key options.
Protecting Your Rights at Every Stage
An IRS audit determination is not necessarily the final word. Taxpayers have meaningful rights to challenge unfavorable decisions through administrative appeals and, if necessary, the courts.
Understanding the process, and acting within required deadlines, can make a significant difference in the outcome.
Powell Tax Law assists individuals and businesses at every stage of an IRS dispute, from audit representation to Appeals conferences and Tax Court proceedings.
If you have received an audit notice or disagree with an IRS determination, reach out to us as early as possible for experienced legal guidance that can help you pursue the most favorable resolution available.
