After an IRS examiner receives your documentation and makes a decision regarding proposed changes to your return, you have several options. You can sign the letter stating that you agree with the proposed changes, and then decide what payment method you would prefer to use, whether paying in full, applying for an installment agreement, or seeking an Offer in Compromise. If you don’t agree with the proposed changes, you should first try to negotiate further with the IRS examiner.
You may be able to persuade the IRS examiner of their mistake by providing additional documentation. You can also request a telephone conference with the examiner, where you or your tax attorney can explain your arguments.
If neither of these methods are successful, you may request an informal conference with the examiner’s manager. You may instead request that your case is sent to IRS appeals, which has the advantage of being an entirely separate department within the IRS. The appeals officers can evaluate the likelihood that the IRS will win your case if you end up filing a petition in Tax Court, and may decide to settle if it seems probable that you could bring a successful case.
Be sure to provide your examiner with all of your documentation before requesting an appeal. If you present new information at the appeals level, your case may be sent back down to the examiner for a reevaluation.
IRS appeals will usually conduct a conference by telephone, but they can also perform in-person conferences if you would prefer. The appeals process is free to taxpayers, so it may be worth the trouble if you have any sort of argument for disputing the proposed changes. However, appeals is not appropriate if your only issue with the proposed tax is your inability pay. In these situations, apply for a payment plan or Offer in Compromise.
If your case is not settled at the appeals level, the IRS will send you a Notice of Deficiency for the assessed tax, also known as a 90-day letter. If you still want to dispute the tax without paying the tax liability, you will have to petition Tax Court within 90 days of this letter. You can continue to negotiate with your examiner during this 90-day window, but you cannot negotiate to have this time period extended, so you should be prepared to file your timely petition while your negotiations are taking place.