Most audits can be appealed internally within the IRS, without requiring litigation in Tax Court. The IRS Appeals Office is independent from the IRS auditing division, and would prefer to settle cases quickly rather to take them to Tax Court.
There are several reasons taxpayers should consider appealing the results of an IRS tax audit:
- you can receive substantial savings on your tax bill
- the appeals process does not cost you anything, unless your consult with or hire a tax attorney for your appeal
- you still preserve your right to petition the U.S. Tax Court, whether or not your appeal
- the IRS appeals office is may be motivated to settle cases before they go to court
Despite these benefits, many taxpayers simply accept the results of an IRS tax audit without appealing. They may not understand their appeal rights, or be intimidated by the appeals process, but for many taxpayers, it is worth the trouble to challenge the results of a tax audit.
How to File Your Appeal
If your audit takes place at an IRS office, you can request to immediately speak with the auditor’s supervisor if you do not agree with any part of the proposed tax assessment. You can also agree to participate in the Fast Track Settlement program to have your dispute resolved in a meditation session.
If you cannot come to an agreement with the supervisor, or if your audit does not take place at an IRS office, you will receive a letter (known as a 30-day letter) notifying you of your right to appeal the audit within 30 days. You can request to have a conference with an appeals officer to attempt to negotiate your tax assessment without filing a petition in Tax Court.
For small cases below $25,000 in tax debt, you may file an informal small case request for an appeal that specifies your reasons for appealing. Larger cases will require you to send a formal protest letter.
You will typically have at least 60 days to prepare for the appeals conference. You have the right to review almost all of the auditor’s documents when preparing for your case to understand why the auditor made their conclusions, which can help you frame your arguments and point out any mistakes the auditor may have made.
Appeals officers have the option to consider whether you are likely to win your case in Tax Court. They do not want to create situations where unfavorable legal precedents will be set, which means they would rather settle your case than risk having taxpayers all over the country relying on a favorable court ruling. On the other hand sometimes the IRS designates a particular issue for litigation because they want the Tax Court to create a nationwide position.
If your audit resulted in a large tax assessment against you, or involves a complex legal issue, consult with a tax attorney to discuss your appeal options.