Appealing the results of an IRS examination is usually beneficial to a taxpayer if there is a basis for disputing the findings. The process doesn’t cost anything (although it’s highly recommended that you retain a tax audit attorney), and could potentially result in significant tax savings, making it a good investment for many taxpayers. You could go directly to Tax Court to resolve your issues instead, but this is a more costly procedure, and you can generally go to Tax Court after filing your IRS appeal if you still aren’t satisfied.
Keep in mind that you should have a legitimate reason for disputing the tax liability before filing an appeal. If your only issue is that you can’t pay the tax, you can file an Offer in Compromise or request an installment agreement that allows you to pay off your tax debt over time.
How to Request an Internal IRS Appeal
For most disputes regarding tax liabilities of $25,000 or less, you can request an appeal using a small case request letter. This is an informal letter informing the IRS that you would like to have your case reviewed, where you will explain the items you disagree with and your reasons for disagreeing with these items.
Larger cases require a formal written protest. Your protest will contain more detailed information than a small case request, including the facts supporting your position and any applicable law that supports your arguments. If the IRS has the facts of your case wrong, be prepared to provide evidence showing why they made the wrong decision. If you have substantial new information that your examiner didn’t get to see, your case may be sent back to the examiner for further consideration.
You generally have 30 days from the date of the examiner’s decision letter to appeal. The only real risk in these cases is that the IRS Appeals Officer discovers unfavorable items that the examiner missed, resulting in a higher tax assessment against you. This doesn’t happen often, but you should discuss any concerns about these issues with your audit defense attorney before requesting your appeal.
Appeals can result in a total reversal of position by the IRS, a partial change in your tax assessment, or no change at all. If you still want to fight your case after the appeal, you can file your petition in Tax Court once you receive your Notice of Deficiency.