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How to Appeal an IRS Audit in 2025: A Step-by-Step Guide

Calculator and the word tax representing How to Appeal an IRS Audit in 2025

Facing an IRS audit can be daunting, especially when the results aren’t in your favor. If you’ve received an audit determination and want to challenge it, the process of filing an appeal is crucial. 

John Milikowsky, Founder of Milikowsky Tax Law, dives into all the details in the video below:

Key Takeaways:

  • Submit your protest letter before the audit closes to avoid a tax court situation.
  • Your protest letter must be signed under penalty of perjury and include a clear summary of disputes.
  • Provide supporting evidence, like bank statements or loan documents, to back up your claims.
  • If necessary, the case will be sent to IRS Appeals for further review, which may lead to a more favorable resolution.
  • If appeals don’t go in your favor, you still have the option to appeal to tax court, but you must act within strict deadlines.

In this blog, we’ll walk you through the steps of appealing an IRS audit in 2025, so you can understand your options and take proactive action to safeguard your financial interests.

1. Understand the Appeal Process

The first thing to know is that an appeal can only be made before the audit closes. Once the audit is concluded, you’ll receive a Notice of Deficiency, which essentially serves as your ticket to tax court. However, if you are still in communication with a revenue agent, you have the opportunity to file an official protest letter before the audit is finalized.

2. Drafting the Protest Letter

The protest letter is your official response to the IRS’s findings, and it must be submitted before the audit closes. To help you navigate this, here’s what your protest letter should include:

  • Signature Under Penalty of Perjury: The letter must be signed and stated under penalty of perjury to certify that the facts and information in your letter are true and correct.
  • Summary of Disputed Issues: Clearly summarize all the issues you are disputing, referencing the Revenue Agent Report. This report typically outlines the balance due, taxes owed, and any additional penalties and interest.
  • Evidence and Supporting Documents: If you’re disputing certain findings, like additional income or disallowed deductions, you must provide evidence. For instance, if you disagree with the IRS’s claim of unreported income, provide the necessary bank statements, promissory notes, or loan documents that explain the discrepancies.

3. Addressing Specific Issues

One common audit issue involves discrepancies in reported income. The IRS often conducts a bank deposit analysis and may identify unreported income based on unexplained deposits in your bank accounts. If this applies to you, follow these steps:

  • Bank Statements: Provide detailed bank statements that support your claims.
  • Explain Unexplained Deposits: If you borrowed money from a relative or received funds that weren’t income (like a loan), make sure to provide supporting documentation. A simple promissory note or a copy of the loan transaction can help clarify the situation.

By itemizing your issues and providing supporting documents, you are showing the IRS that you are serious about challenging their findings with credible evidence.

4. Submit Your Protest Letter Before the Deadline

Once your protest letter is drafted, submit it to the revenue agent before the deadline stated in the IRS’s communication. If you need more time, you can request an extension from the agent. However, missing the deadline will result in the audit being closed, and you will receive a Notice of Deficiency.

Make sure to confirm receipt of your protest letter with the IRS, either by fax or mail. Communication is key at this stage.

5. IRS Appeals: The Next Step

Once your protest letter is submitted, the case will be sent to IRS Appeals. Here, an appeals officer will review your evidence and the findings from the revenue agent. You will receive either a letter or a phone call from the appeals officer, confirming that they are reviewing your case. If any new information is provided during the appeals process, it will likely need to be sent back to the original revenue agent for analysis.

The goal of the appeals process is to determine whether the IRS agent’s findings were justified, based on the information you’ve provided. If the appeals officer agrees with your position, they may overturn the findings, potentially saving you from a higher tax bill.

6. The Appeals Decision: What Happens Next?

Once the appeals officer reviews your case, they will make a final determination. If the officer agrees with you, the case will be resolved, and you’ll avoid further legal action. However, if the appeals officer disagrees with your position, you have the option to appeal to tax court—but keep in mind that there are strict deadlines for taking this step.

While the appeals process is less costly and quicker than going to tax court, if you still disagree with the IRS’s decision, tax court is the next route.

Get Help with your IRS Audit Today

Appealing an IRS audit may feel overwhelming, but knowing the steps involved can help you navigate the process with confidence. By preparing a well-drafted protest letter, gathering supporting evidence, and working closely with the IRS appeals officer, you can increase your chances of resolving the issue before it escalates further.

At Milikowsky Tax Law, we specialize in helping individuals and businesses through complex tax matters, including audits and appeals. If you find yourself in the middle of an audit, contact us today to discuss your options and ensure you’re taking the right steps to protect your financial future.