You received a notice that the IRS is auditing your tax return. The audit is completed and the Examining Agent proposes a significant increase to your tax liability. Is it time to open your checkbook and say goodbye to your nest egg? Not necessarily.
How to Appeal an IRS Audit
At the end of an audit, the IRS will send you a report detailing all proposed changes to your tax liability. As long as you do not sign and return your copy of this report, the IRS will generate and issue a “30 day letter”.
The "30 day letter" explains that you have 30 days to file a protest to the IRS Office of Appeals. Your protest must include the following information:
- Your name, current address, and phone number
- Your statement of intent to appeal the IRS decision
- A copy of the report with the proposed liability changes
- The tax periods involved in the case
- Each proposed change you are disputing, along with reasons and facts to support your argument
The protest must then be finished with a penalties-of-perjury statement and your signature.
Resolving IRS Appeals Without Litigation
But is appealing the decision of the auditing agent really worth it? After all, the Appeals Office is merely an arm of the Internal Revenue Service, so the appeal is really just for the appearance of fairness, right? This seems to be the perception of most people we deal with, but it is not correct.
The IRS Appeals Office has the stated object of resolving taxpayer disputes without litigation and that is exactly what they do. More than 80% of the appealed IRS cases settle, and many sources report that the average appeals case settles for 40% less than the auditor’s proposed adjustment. This is hardly a sham appeals process to give the appearance of fairness.
These statistics should not be confused with the often touted “cut your tax bill to pennies on the dollar” claims made by many national “tax relief” companies. This is not a method for reducing undisputed tax debt; this appeals process is for disputing the assessment of additional tax where there is a legitimate dispute as to the validity of the underlying tax liability which has a chance of giving rise to successful litigation against the government.
Additional Options
Even when the IRS Appeals Office does not provide an acceptable solution, there are still options other than paying the additional taxes. After the expiration of the 30 day period to appeal a proposed assessment, or at the end of the appeal process, the IRS will issue a 90 day letter. During this 90 day period, the taxpayer may petition the United States Tax Court for relief. The Tax Court provides the taxpayer with the ability to have a Court rule on their assessment without having to first pay the assessed tax.
Reach out to Penzien & Mcbride, PLLC
If you have been notified that you or your business will be subjected to an IRS audit, or if you have been audited and disagree with the results, a Penzien & McBride attorney can assist you with the process of appealing the audit. Even if you have blown the 30 day (or even the 90 day) timeframe for appealing the assessment, we may be able to get you a second shot at appeals through the IRS audit reconsideration process. Contact our federal tax firm at (586) 690-4400.
Michigan attorneys serving individuals and businesses primarily in Macomb, St. Clair, and Oakland Counties, near Detroit.