Can you Appeal an IRS Tax Audit?

Picture to accompany article about audit lawMany people are thankful for second chances in life. We accept them, give them, and use them. Sometimes people disagree about the tax audit decisions made by the IRS. What can you do when you when this happens to you? Fortunately, there are several options available and here we will outline a few of the steps you could take that you might not have known existed.

The Pros and Cons of Appealing a Tax Audit

Going up against the IRS on just about anything sounds rather anxiety-inducing and frightening. That’s a good reason to have some basic awareness of the pros and cons of appealing an audit so you know what you’re signing up for. The office of IRS Appeals consists of 2,000 employees throughout the country. These employees have more flexibility than auditors to reach a compromise, are often senior accountants, auditors, or have worked for many years at the IRS. In many cases, they will rule in favor of those filing appeals. They will listen to anyone who has a disagreement with the tax changes of an audit except for political, religious, or moral based rationale.

The good news is, there are some advantages to appealing. First of all, other than the cost for legal counsel, it is free to appeal, which can weigh in as a factor for many going through an audit. Second of all, it is possible to not only fight tax audit changes on an appeal, but also reduce or eliminate penalties. The average reduction in the total dollar amount owed is 40% 1 as a result of appealing – and this increases with the help of an experienced lawyer. More people should take advantage of this! Additionally, the due date of your tax bill is delayed throughout the appeals process. This can give much needed extra time to work out payment arrangements.

A big disadvantage is that if you lose your appeals case, you’ll pay not only all of the initial penalties that were assessed to start with, you’ll end up paying the additional interest that accrued during the appeals process.

Writing an appeal letter to the IRS

In order to request IRS appeals consideration, generally, the first step is for the taxpayer or their representative to write an appeal letter to the IRS. The appeal letter should be addressed and sent to the district office mentioned in the audit communication sent to you by the IRS. That may be, but not is necessarily the location that will handle your appeal. The basic information needed in an appeal letter is the following:

  • Your contact information including address, phone, and email address.
  • A brief summary stating why you’d like to appeal a copy of the original letter with indications of the specific sections you wish to appeal
  • The years and tax periods involved
  • And a list of the specific items you wish to appeal and a detailed explanation of your disagreement, including legal arguments, facts, and analysis

To make it super easy, you can use the IRS form 12203 “Request for Appeals Review” to help with this process.

Presenting your case to the Appeal Officer

You might be able to do your entire appeals process via the postal service and if that’s the case, make sure you send everything via certified mail. But in the event of an in-person appeal review here are a few tips to help you prepare:

  • Although not required, it’s often helpful to have a tax professional go with you
  • Try to meet the communication style and vocabulary of the reviewer. If they are focused on adjustments, for example, then discuss that as much as you can.
  • Present facts that will help you win in court, should your appeal case go in that direction. The reviewer will want to avoid this scenario and will likely listen

Getting Help for your Appeal Process

Though tax professionals are not required to appeal an audit, the prospect of doing this alone can be daunting. Here are a few quality traits to look for when selecting an appropriate tax professional to serve your needs in an audit appeal process:

  • Personality fit- You want to make sure you have someone you like and trust to represent your best interests
  • Organization- Has strong attention to detail and won’t miss the small stuff that can make a difference in an appeal
  • Experience- They understand the business challenges of your small company and have a strong general understanding of the tax laws that are applicable to your situation
  • Good listener- They show an ability to learn effectively about you and your unique business needs and industry

In conclusion, once you know a few of the ins and outs of appealing an audit, you can make a decision that makes the best sense for you and your business – but you should always speak with a lawyer or tax professional! There are many cases where filing an appeal can be beneficial for getting penalties erased, the amount owed lowered or erased, and delaying the due date of the amount owed. There are a few options for getting started, such as writing a strong appeal letter. If you can’t handle it on your own, there are plenty of great resources out there to help you out with the process. Gordon Law Ltd. would like to be one of them. If we can help, or have additional questions, we’d be happy to set up a call with you.

Links / References:

  1. https://www.investopedia.com/articles/tax/09/appeal-your-audit.asp
  2. https://apps.irs.gov/app/picklist/list/formsPublications.html
  3. https://www.irs.gov/pub/irs-pdf/p5.pdf
  4. https://www.irs.gov/appeals/preparing-a-request-for-appeals
  5. https://www.irs.gov/pub/irs-pdf/f12203.pdf
  6. https://www.irs.gov/government-entities/federal-state-local-governments/appeals-process
  7. http://www.taxhelpattorney.com/tax-solutions/tax-audit-reconsideration/
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