What are Tax Appeals?
If the IRS ever makes a change to your tax return that you disagree with, you always have the right to appeal its decision. Tax appeals are a common way to resolve disagreements you have with the IRS that relate to items you report on your return. If you decide to go this route, there are procedures you must follow to insure you retain your right to an appeal.
The IRS has an impartial Appeals Office that is separate from other offices of the agency that investigate or audit tax returns. If you receive written notification of an adjustment the IRS is making to your tax return, such as disallowing a deduction, you have the right to disagree and request an appeals conference.
The appeals conference is an informal meeting in which an impartial officer settles the dispute in the same way a judge does between a plaintiff and defendant in court. You are entitled to hire a practitioner to represent you at the conference provided they are authorized to practice before the IRS, such as an attorney or CPA. If you are unsatisfied with the officer’s decision, you may file suit in court.
Exercising your right to an appeal requires you to prepare a formal written protest. The document must include your personal contact information, an affirmative statement that you are requesting your right to an appeal, a copy of the notification you received from the IRS, the relevant tax years that give rise to the dispute and statements of law and fact that support your tax return position.
If the amount in dispute, including penalties the IRS assesses, is $25,000 or less, you can submit an informal small-case request. A small-case request generally relieves you of the obligation to submit formal protest documentation.
If the appeals officer agrees with the IRS, you have the option of challenging the IRS in court. If you choose to pursue the issue in court, you can pay the amount of tax in dispute and file the appropriate documentation in a U.S. District Court or the Court of Federal Claims for a refund. If you are unable to or refuse to pay the tax, then only the U.S. Tax Court has jurisdiction over your case. You don't need to hire a lawyer to do this since all taxpayers can represent themselves.
If you've had no luck with the appeals office or in court, then the IRS has no choice but to start collecting your tax debt from you. There is a separate appeals process for collections, but at this stage, you cannot challenge the validity of your tax debt, but only the methods the IRS uses to collect it. If the federal government obtains a property lien, you are entitled to a hearing immediately after you receive written notification of the lien.
The IRS is also permitted to collect outstanding taxes using levies that can result in wage garnishments and the freezing of assets in a bank account. The IRS must provide you with advance notice before it enforces a levy or a lien. When it fails to give you notice or violates other laws and procedures, then you have the right to an appeal. However, this will only delay the IRS from collecting tax from you; it will not relieve you of any liability to pay it.