IRS Tax Appeals Process: How to Resolve Your IRS Case

Imagine if every taxpayer who had a beef with the IRS took those scoundrels to court. Well, seeing how there are about 100-million tax filers, somewhere in the vicinity of 1-million Americans owing some kind of money to the IRS, and yet another million or so under some type of audit, the Federal Courts would quickly be overwhelmed with nothing but tax cases. The potential for complete chaos is one of the main reasons why the US government created the IRS Office of Appeals.


The purpose of the IRS Office of Appeals is to provide for an administrative, out-of-court means for taxpayers to resolve their differences with the IRS without having to resort to legal action that would shut down the Federal court system. Although the IRS Office of Appeals has wide-jurisdiction to settle a variety of cases, there are limitations to the kinds of cases that they can hear.


First, if you want to go to tax court, you must start with IRS appeals!

This is called exhausting administrative remedies. Our court system wants taxpayers to resolve their cases at the lowest level possible — no offense to Tax Appeals Officers, of course — before climbing up the chain. It's important to get this first step right as cases are routinely dismissed because taxpayers did not "exhaust their administrative remedies." What this means is, if you have an argument to make, make it with IRS Appeals first. They might even agree with you! Don't raise issues for the first time in tax court and expect to win.


What kind of cases are appealed?

Individual Correspondence Audits: There are "paper" audits, or "corr" audits. These audits are all done by mail. The IRS makes far more money off of these types of audits than "field" — or in-person — audits. One of the reasons, we suspect, is that the process is so frustrating that many taxpayers just give up during the "corr" audit process.


Field Audits: Field audits are the in-person audits most people imagine when they think about the IRS. Even though there are far fewer field audits in number, we tend to wind up with more of these appeals as the issues are complicated the stakes are high. We have suspicions that most people involved in "corr" audits don't understand the significance/right of appealing their audit. On the other side of the spectrum, those who have been personally inspected by the IRS often realize that an appeal is their best chance for a positive resolution.


Denial of Claims for Refunds: Claims for refunds are time sensitive and it is difficult — if not impossible — to win a claim for refund if you are late to appeal. However, one type of claim for refund appeal that can be successful has been seen in the cases of individuals who have been assessed a Trust Fund penalty through the 4180-Interview process and failed to raise a defense or had a taxpayer representative with a conflict of interest (i.e., CPA represented two taxpayers, partner A and partner B. CPA was sleeping with partner A and the two colluded against partner B).


The issuance of a lien or proposed levy or seizure: Be warned – the window to claim an appeal is limited. Typically an appeal must be filed 30 days after an issuance of a Final Notice of Intent to Levy or Notice of a Federal Tax Lien in order to preserve the right to tax court. There are other appeal rights that exist for up to a year afterwards, but those will not trigger the right to tax court if settlement is unsuccessful.


The proposed rejection of an installment agreement or offer in compromise: If an offer in compromise is rejected by an examiner or an installment agreement rejected by a revenue officer, oftentimes — if we think we have a strong case — we will file an appeal.


Note: In order to prevail, we must demonstrate exactly where the IRS employee was wrong and why our solution is the most reasonable. Not only that but for a truly winning appeal, it's absolutely imperative that the offer is in the best interest of the IRS. For this, solid financial statements must be prepared and documented. We do not win appeals simply because we are nice guys, rather through hard, diligent, and thorough work.


After appeals

If the case is settled, the taxpayer will sign something called a closing agreement that the IRS Appeals Officer will have prepared. If the taxpayer agrees with the settlement, that ends the case. If the taxpayer does not agree, there is a limited amount of time to file a petition in tax court. However — and this is really important — if one of the reasons why the Appeals Officer ruled against the taxpayer was because they failed to show up for your appeals hearing, if they presented no alternative, or if they were generally uncooperative, the chances of winning a case in tax court is very small. Why? Because the tax court judge will rule that the taxpayer did not "exhaust your administrative remedies." Is this unfair? You can bet your bottom dollar that it is.



In order to come to the most optimal resolution of your tax dispute, your case — from start to finish — must be treated with the utmost respect. Go in as if you were going to make a case in front of a solemn jury; it's that serious. You absolutely have to be that intense and deliberate about the situation at hand. The law allows you to represent yourself at IRS appeals, but it also allows you to argue on behalf of yourself at a criminal trial. Does either one sound like a prudent idea when your future is on the line?

If you find yourself overwhelmed and need assistance, contact  uss. We can help. Appeals can be an incredible way to settle your tax problem, but many people are either unaware or afraid to go down this route. Keep your head up and keep pressing on. Your future is important, and it deserves to be fought for.