How to Appeal an IRS Audit Decision: A Comprehensive Guide

Facing an IRS audit can be stressful, and receiving a decision you disagree with can feel overwhelming. However, the IRS provides a structured process for taxpayers to appeal audit findings. This guide will walk you through every step of appealing an IRS audit decision, from understanding your rights to preparing your protest, navigating the appeals process, and considering further options if needed.

1. Understanding Your Audit Outcome

After an IRS audit, you will receive a formal report detailing the IRS’s findings. This report will explain any proposed changes to your tax return, including additional taxes, penalties, and interest. The IRS will also send you a letter-commonly called a “30-day letter”-which outlines your appeal rights and provides instructions for how to proceed if you disagree with the audit results.

Key Points to Review:

• The specific items the IRS adjusted or disallowed
• The calculations used to determine additional taxes, penalties, or interest
• The documentation the IRS used to support their findings

Tip: Read the audit report and accompanying letter carefully. Make notes on any areas you believe are incorrect or misunderstood.

2. Deciding Whether to Appeal

You have the right to disagree with the IRS’s findings and to appeal their decision. Before you start the appeal process, consider the following:

• Do you have documentation or evidence to support your position?
• Are the amounts in dispute significant enough to warrant an appeal?
• Have you discussed your concerns with the IRS examiner? Sometimes, misunderstandings can be resolved directly with the examiner before moving to a formal appeal.

If you still disagree after discussing the case with the examiner, you should proceed with the formal appeals process.

3. Do Not Sign the Audit Report If You Disagree

If you agree with the IRS’s findings, you can sign the report and pay any additional tax owed. However, if you disagree, do not sign the report. Signing the report indicates your acceptance of the IRS’s findings and waives your right to appeal.

4. Understanding the IRS Appeals Process

The IRS Independent Office of Appeals is a separate entity within the IRS, designed to resolve tax disputes impartially and fairly, without litigation. The goal is to settle disputes without the need for court intervention, saving both the taxpayer and the IRS time and resources.

Key Features of the Appeals Process:

• Appeals officers are independent of IRS examiners.
• The process is informal-you can represent yourself or have a tax professional represent you.
• Most cases are resolved at this stage, without going to court.

5. Filing Your Appeal: The Protest Letter

To initiate the appeals process, you must file a written protest or appeal request within 30 days of the date on the IRS’s 30-day letter. This protest is your opportunity to explain, in detail, why you disagree with the IRS’s findings.

What to Include in Your Protest Letter

A formal written protest should include the following elements:

1. Your Name, Address, and Daytime Phone Number
2. A Statement of Intent
   Example: “I am requesting an appeal with the IRS Independent Office of Appeals regarding the findings in the audit of my [tax year] return.”
3. A Copy of the IRS Letter
   Attach the 30-day letter or examination report you received.
4. Tax Year(s) Involved
   Clearly state which tax years your appeal concerns.
5. List of Items Disputed
   Identify each item in the audit report with which you disagree.
6. Explanation of Your Position
   For each disputed item, provide a detailed explanation of why you believe the IRS is incorrect. Reference relevant documentation, tax law, or court cases if possible.
7. Facts Supporting Your Position
   Clearly state the facts and circumstances that support your argument.
8. Law Supporting Your Position
   If possible, cite relevant sections of the Internal Revenue Code, IRS publications, or court cases.
9. Penalties-of-Perjury Statement
   Required for formal protests:
   “Under penalties of perjury, I declare that the facts stated in this protest and any accompanying documents are true, correct, and complete to the best of my knowledge and belief.”
10. Your Signature

Tip: Organize your protest logically and professionally. Number each item you dispute and provide supporting evidence for each point.

6. Small Case Requests (Disputes of $25,000 or Less)

If the total amount of tax, penalties, and interest for each tax period is $25,000 or less, you can submit a “small case request” instead of a formal written protest. This can be a simple letter stating:

• That you want to appeal the findings
• The items you disagree with and why
• Your contact information

Note: The IRS provides instructions for small case requests in the 30-day letter.

7. Submitting Your Protest

Send your protest letter or small case request to the address provided in your 30-day letter. Ensure you keep a copy for your records and use a trackable mailing method.

Tip: Timeliness is critical. If you miss the 30-day deadline, you may lose your right to appeal within the IRS and may have to petition the U.S. Tax Court instead.

8. What Happens After You File Your Appeal

IRS Review and Appeals Conference

• The IRS Independent Office of Appeals will review your protest and case file.
• An appeals officer will be assigned to your case. They may contact you for additional information or clarification.
• In most cases, you will be invited to participate in an appeals conference. This can be conducted by phone, video call, or in person.

Preparing for the Appeals Conference

• Gather Documentation: Collect all relevant records, receipts, and correspondence.
• Organize Your Arguments: Be ready to explain your position clearly and concisely.
• Consider Representation: You may represent yourself, or you may choose to have a tax professional (such as an Enrolled Agent, CPA, or tax attorney) represent you.

The Appeals Conference

• The conference is informal and designed to encourage open discussion.
• The appeals officer will review both your arguments and the IRS examiner’s findings.
• You may present new evidence or arguments not previously considered.
• The goal is to reach a fair settlement based on the facts and applicable tax law.

9. Possible Outcomes of Your Appeal

• Full Concession: The IRS may agree with your position and reverse the audit findings.
• Partial Concession: The IRS may agree with some, but not all, of your arguments, resulting in a reduced tax liability.
• No Change: The IRS may uphold its original findings if your arguments and evidence are insufficient.

If you reach an agreement, you will sign a closing agreement or Form 870, Consent to Proposed Tax Adjustment, to finalize the settlement.

10. If You Cannot Resolve Your Case in Appeals

If you are unable to reach a satisfactory resolution with the Office of Appeals, you have the right to take your case to the U.S. Tax Court or, in some cases, to a U.S. District Court or the Court of Federal Claims.

Petitioning the U.S. Tax Court

• You must file a petition within 90 days of receiving a statutory notice of deficiency (also known as a “90-day letter”) from the IRS.
• The Tax Court process is more formal and may require legal representation.

11. Practical Tips for a Successful Appeal

• Be Thorough and Honest: Provide complete and accurate information. Omissions or inaccuracies can harm your credibility.
• Stay Professional: Be respectful and cooperative in all communications with the IRS.
• Keep Records: Maintain copies of all correspondence, forms, and supporting documents.
• Meet Deadlines: Missing deadlines can forfeit your appeal rights.
• Consider Professional Help: Tax professionals, such as Enrolled Agents (EAs), CPAs, or tax attorneys, can provide valuable guidance and representation, especially in complex cases.

12. Common Reasons Taxpayers Appeal IRS Audit Decisions

• Disagreement over the disallowance of deductions or credits
• Disputes regarding unreported income
• Challenges to penalties assessed by the IRS
• Misunderstandings or errors in the IRS’s interpretation of facts

13. How a Tax Professional Can Help

A tax professional like Mike Habib, EA, can:

• Review your audit report and identify areas of disagreement
• Help you gather and organize supporting documentation
• Draft a compelling protest letter
• Represent you in communications and conferences with the IRS
• Advise you on the strengths and weaknesses of your case
• Guide you through the appeals process and, if necessary, represent you in Tax Court

14. Summary Table: Steps to Appeal an IRS Audit Decision

Step	Action Required
Review Audit Report	Understand IRS findings and reasons for adjustments
Do Not Sign If Disagree	Preserve your right to appeal
File Written Protest	Prepare and submit a protest letter or small case request
Submit to IRS	Mail to the address in your 30-day letter, keep copies for records
Participate in Appeals	Attend conference, present evidence, discuss settlement options
Finalize Outcome	Sign agreement if resolved, or receive notice of deficiency if not
Consider Tax Court	File petition within 90 days if unresolved in appeals

15. Conclusion

Appealing an IRS audit decision is a well-defined process that gives you the opportunity to present your case, correct misunderstandings, and potentially reduce or eliminate additional tax, penalties, or interest. By understanding your rights, preparing a strong protest, and engaging effectively with the IRS Office of Appeals, you can ensure your voice is heard and your interests are protected.

If you feel overwhelmed or uncertain, don’t hesitate to seek help from a qualified tax professional. Their expertise can make a significant difference in the outcome of your appeal.

Remember:
Timeliness, thoroughness, and professionalism are your best allies in the IRS appeals process. With the right approach, you can navigate this challenge and achieve a fair resolution.

Call us today for professional help 1-877-788-2937.