IRS Appeals: What Are Your Options?
Audits from the IRS are not only stressful, but they can also disrupt your business and force you to change your operating practices. Some companies can afford to absorb the new additional taxes. For others, appealing an audit decision may be the best option to reduce taxes on issues they challenge and win in IRS appeals.
Many business owners are unaware that it is possible to appeal an IRS audit, and it happens regularly. In fact, the IRS Office of Appeals receives more than 100,000 appeals cases each year from taxpayers who thought they might have been treated unfairly, unethically, or felt their final taxes owed may be inaccurate.
Who Can Appeal?
Every taxpayer who is assessed additional taxes is eligible to appeal a final audit notice if they file a timely protest.
Appealing the results of an audit may require presenting new or different information about the problems you perceive in the audit. Before you choose to appeal, make sure that you have enough supporting information and articulate your legal arguments.
Your inability to pay your final tax assessment is not a valid reason to appeal.
The Appeals Process
Once you’ve received your IRS notice of assessment, you can decide if the appeals process is right for you. This usually involves collecting the facts and supporting information necessary to support your case, and speaking with a professional tax lawyer who can help develop sound legal arguments. Your success in the appeals process will depend on proving to the IRS that your arguments are valid and you can substantiate your position with reliable evidence.
The best circumstances for filing an appeal are:
- You believe the IRS made an error or misinterpreted the law.
- You believe a law was improperly applied due to misinterpretation of the facts.
Once you’ve decided to appeal your IRS assessment, you have limited time to file your protest letter.
First, draft a formal written protest signed under penalty of perjury that will be mailed to the IRS’ Office of Appeals. The protest letter must include your name, address, phone number, and a statement that you wish to appeal IRS findings. Include legal arguments, facts, and documents in support of your position.
You will also attach a copy of the exact letter you received from the IRS, a list of items on the penalty assessment, and an explanation of your reasoning for disagreeing with the initial IRS findings. Include facts that support your claim, as well as documentation of any laws that can assist in your protest. To add to your case, a professional tax attorney can prepare a statement that declares the facts stated in your protest to be true. After you send these materials in, the IRS will examine your case and decide if it qualifies for review.
Timeliness is a critical factor in determining whether or not your case is reviewed. If the IRS does not have all of the information within 30 days, they may return your case to the auditor overseeing your tax assessment.
Is the Process Worth It?
While the success of your protest depends on the case you build, preparing an appeal of an IRS decision may be your best bet if you feel you have a true case. It’s important to understand the impact an appeal will have on your business, and you should ensure you are prepared for that impact before you make your decision.
Appealing a decision will delay your tax bill for months, which can give you time to build some financial stability in preparation for the decision.
Appealing a decision can also lead to an appeals officer raising issues that your initial auditor might have missed. Also, the interest on your tax bill will continue to grow while you wait for your appeal to be processed – so regardless of the final decision by the IRS, be prepared to be responsible for the interest your tax bill accrues during the process.
As the owner of a business, it is up to you to determine whether you have a strong case for appealing an audit decision. It is entirely within your rights to appeal the results of your IRS audit, but it’s important to review the facts and understand the process. Review your documents carefully, act quickly, and seek guidance from a professional to help build a solid case – and you very well may be rewarded with a favorable appeal.