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August 27, 2019

Taxpayer Rights: Appealing IRS Decisions


As tax attorneys in Columbus, Ohio, Nardone Limited routinely assists individuals and businesses with representation in tax examinations, audits, and civil litigation with the Internal Revenue Service (the “IRS”) and state tax agencies. As part of that representation, our tax attorneys keep individuals and businesses informed about new information and guidance provided by the IRS, as well as taxpayer rights. This article is the first of a series highlighting a taxpayer’s right to appeal IRS actions to the Office of Appeals (“Appeals”).


The IRS accepts most of the returns taxpayers file. But, other returns are selected for examination or audited by the IRS to determine whether a taxpayer accurately reported income, expenses, deductions, and credits (the “Examination”). Pending the outcome of an Examination, a taxpayer that disagrees with the outcome of an Examination can challenge the outcome at Appeals.

Appeals is an independent organization within the IRS that helps taxpayers resolve tax disputes through an informal, administrative process. A taxpayer can appeal several types of tax disputes to Appeals, including proposed adjustments, actions, penalties, interest, trust fund recovery penalties, liens, levies, and offers in compromise. Taxpayers today expect more options for resolving tax disputes, and Appeals is one of the options the IRS provides.

Appeals is a form of alternative dispute resolution and strives to resolve tax disputes in a fair way that is impartial and cost-efficient for both the taxpayer and the IRS. The role of Appeals is to make an independent review of a tax dispute, considering the positions of both the taxpayer and the IRS. Before discussing Appeals any further, we will first review the Examination process.

The Examination Process

The IRS selects a return for Examination in one of two ways. The first way is to identify returns that may contain incorrect amounts by using a computer program. The computer program selects the returns based on information returns (i.e., Forms 1099, W-2, etc.) received by the IRS.  The second way is by using information received from IRS compliance projects that indicate that a taxpayer’s return may contain incorrect amounts. Once a return is selected for review, the IRS conducts the Examination either by mail or in person. It should be noted that nearly eighty percent of Examinations are conducted by mail.

Taxpayer Notification

If the Examination is conducted by mail, the taxpayer receives a letter from the IRS requesting additional information about certain income, expense, deduction, and credit items claimed on the return. If the Examination is conducted in person, the IRS informs the taxpayer that the taxpayer’s return is under exam and requests any additional information needed from the taxpayer. Once the taxpayer gathers the information, the time and location of the Examination is scheduled. In-person Examinations take place at the taxpayer’s home or place of business, the taxpayer’s representative’s place of business, or an IRS field office.

The Examination

During the Examination, an IRS examiner (the “Examiner”) reviews the additional information provided by the taxpayer. Throughout the process, the Examiner works with the taxpayer to ensure that the taxpayer provides all documentation necessary to allow the Examiner to accurately perform the Examination. Then, the Examiner compares the additional information provided by the taxpayer with the income, expense, deduction, and credit items with the income, expense, deduction, and credit items from the return under Examination. The Examiner then makes a determination.

Examination Results

After comparing the information provided by the taxpayer to the return under Examination, the Examiner will either accept the return as filed or propose changes to the return. If the IRS accepts the return as filed, the taxpayer receives a letter stating that there are no proposed changes and the matter is closed. If the IRS does not accept the return as filed, the Examiner prepares a report explaining the positions of the IRS and the taxpayer (the “Report”). The IRS sends the Report along with a letter, known as a thirty-day letter, and an agreement form to the taxpayer informing the taxpayer of the IRS decision and proposed changes (the “Correspondence”). The taxpayer then has thirty days from the Correspondence to either agree or disagree with the proposed changes.

If the taxpayer agrees with the proposed changes, the taxpayer signs the agreement form and pays the additional tax assessed, as well as any interest and applicable penalties. Or, if the taxpayer is entitled to a refund, the taxpayer receives a refund, along with interest. If the taxpayer disagrees with the proposed changes, the taxpayer does not sign the agreement form and must follow the guidance provided in the Correspondence to appeal the IRS decision to Appeals.

The Appeals Process

Appeals is the only level of appeal within the IRS. The mission of Appeals is “to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the government and the taxpayer, and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the IRS.” The taxpayer initiates the appeals process by requesting a conference (the “Conference”) with an Appeals officer (the “Appeals Officer”).

Requesting a Conference

Taxpayers with total proposed changes in tax, interest, and penalties of $25,000 or less for each tax period at issue can make a “small case request.” The small case request allows the taxpayer to appeal the decision by sending a brief written statement to the IRS requesting a Conference.

A taxpayer is required to file a formal protest to the IRS requesting a Conference if: the total amount of tax, penalties, and interest is more than $25,000; the case involves a partnership or S corporation, regardless of the amount at issue; the case involves an employee plan or exempt organization, regardless of the amount at issue; and all other cases. Once the IRS receives the taxpayer’s request for Conference, the Examiner forwards the taxpayer’s case to Appeals. Appeals then contacts the taxpayer to schedule the Conference. The Conference can be by phone or in person.

The Conference

It is the objective of Appeals to resolve the differences between the IRS and a taxpayer during the Conference. The taxpayer may be required to file a formal written protest letter at this time, which makes it all the more important that the taxpayer retain an experienced professional.

The IRS assigns the taxpayer’s case to an Appeals Officer that takes an independent review of the strengths and weaknesses of the respective IRS and taxpayer positions (the “Review”). The Review is conducted in an informal manner and often involves open dialog between the Appeals Officer and the taxpayer. The Review also gives the taxpayer an opportunity to provide significant new information unavailable or not considered during the initial Examination. If the taxpayer does provide new information, the Appeals Officer works as a liaison to provide the new information to the IRS examiner for additional review and consideration. After the Appeals Officer completes the Review, the Appeals Officer decides whether a proposed adjustment or action outlined in the Correspondence is sustained, modified, or eliminated. Although the appeals process is described as informal, all parties are expected to conduct themselves in an organized and professional manner.

Contact Nardone Limited

Appeals provides an impartial and cost-efficient means for taxpayers to resolve Examination tax disputes with the IRS. Although the appeals process is described as informal, it is important that the taxpayer retains the necessary experienced professionals for additional guidance. Working with the right professionals allows the taxpayer to get the most out of the Examination and appeals process. The right professionals have relationships with Appeals Officers and understand the information and arguments that Appeals needs to make a fair and informed decision. The tax attorneys at Nardone Limited have this understanding and are prepared to discuss your tax dispute matters with the IRS.  Contact Nardone Limited today.

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August 27, 2019


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