April 5, 2017

Denver Tax Attorney   Appealing a Tax AuditThe result of a tax audit is often an assessment of back taxes, penalties, interest, and possibly even criminal sanctions. Unknown to many is that taxpayers who receive unfavorable adjustment rulings from an audit have the right to disagree with the IRS and appeal the final results of the audit. The primary objective of the Appeals Division of the IRS is to resolve any disputes between taxpayers and the agency. Based on studies, however, only as little as 10% of taxpayers choose to appeal their audits.

Upon completion of your tax audit, you will receive an examination report from the IRS identifying all recommended changes and assessments. If you disagree with the outcome of the audit and have a valid argument to appeal, you may choose to negotiate with the IRS and potentially lower the amount of your tax debt by formally submitting a written protest within 30 days.

Your formal protest letter must include the following details:

  • Your contact information
  • A statement that you wish to appeal the audit findings to the IRS Office of Appeals
  • The tax years or period involved
  • A copy of the letter you received showing the proposed changes
  • A list of the item or items you disagree with
  • Facts that support your position
  • The authority or law that supports your position, if any
  • The penalties-of-perjury statement
  • Your signature under the penalties-of-perjury statement

In most instances, an Appeals employee should respond to your formal protest within 90 days. If your particular case qualifies for a tax appeal, then the Appeals employee will review your issues and schedule a conference with you. These conferences are generally informal in nature, and are conducted by either telephone, correspondence, or in person. In most instances, differences can be settled without time-consuming and costly court trials.

If a settlement is negotiated at the appeals hearing, the Appeals Officer will issue a Consent to Proposed Tax Adjustment or Form 870. By signing this document, you will agree to pay the settlement amount, and will no longer be able to challenge the existing tax case or issue. If the Appeals Officer sides with the IRS, then you still have the option of challenging the agency in court.

Roughly 80% of audit appeals are used to the taxpayer’s advantage and are considered successful to some degree. By submitting a formal protest and filing an appeal, you may be able to reduce or even completely eliminate any taxes and penalties previously assessed. By appealing your case, you are also able to delay the due date of your tax bill for the duration of the process—which could possibly last for months.

Since appealing a tax audit is your opportunity to restate your case, it would be best to ask a tax professional to handle this matter on your behalf as the rules governing the appeals process are particular and must be followed precisely.

Categories: Tax Appeals