IRS Appeals Procedure
The classic situation in which the Appeals Office has historically reviewed determinations of the Service is with respect to a proposed deficiency in income, estate or gift taxes following an examination. If examination personnel determine a deficiency against a taxpayer, a 30-day letter is normally issued. The 30-day letter consists of a form letter (Letter 915(DO)), a copy of the Revenue Agent’s or Tax Auditor’s Report (the “RAR”) (Form 886-A), and IRS Publication 5 (containing information regarding the appeal procedure). A deficiency, as that term is defined in section 6211, can occur only with respect to income, estate, or gift taxes. Deficiencies by definition cannot arise for any other kind of tax or related penalties, such as employment taxes or the “trust fund” recovery penalty section 6672.
In order to write a good protest, the facts must be ascertained and, to the best of one’s knowledge, be true, correct, and complete. The Service generally sends the protest to the Revenue Agent for fact verification and comment before forwarding it to Appeals. Nothing is more embarrassing or damaging to the taxpayer’s settlement opportunities than an initial overstatement of his factual case from which he will later have to back down. Furthermore, the protest is files under penalties of perjury, so for that reason alone it is important to ensure all the information is correct.
Particularly helpful are factual differences that can be established between what the Revenue Agent’s Examination Report (the RAR) says happened and what really happened. Facts of this nature make it easy for the Appeals Officer to settle the case on a basis favorable to the taxpayer and, where necessary, to justify the settlement to the reviewing officer in the required Appeals Case Memorandum. Exhibits and affidavits are particularly helpful in establishing that the Revenue Agent’s factual interpretations are incorrect, while lending credibility to the taxpayer’s overall factual statement.
Matters alleged as facts may be submitted in the form of affidavits or declared to be true under penalty of perjury. The conference requires the taxpayer to present her position through testimony or documents, respond to the arguments of the agent and Appeals Officer, and be prepared for settlement negotiations. The strength of any legal and factual argument will depend upon the supporting facts and evidence that may be presented. Remember that if you submit new evidence at the conference, the evidence will most likely be assigned to the same agent at the Area director’s office who performed the original examination for consideration and verification.
The taxpayer should avoid going to the conference. If present, the taxpayer will certainly be asked questions. If he or she fails to respond or does so evasively, credibility is lost. If he or she answers, the response may not be presented in the most favorable light, as the taxpayer may get emotional or can, by inadvertent mistake, be wrong. The taxpayer may also volunteer information that is harmful. It is generally best to have the taxpayer answer questions in the form of a carefully considered letter or affidavit. In addition, if the taxpayer is not present, any settlement offer will require his or her approval, thus permitting a careful analysis of the offer and providing additional negotiating room.
If no settlement is reached in a non-docketed case, Appeals will issue a Letter 894(RO) – 90-day letter – to the taxpayer. This will give the taxpayer 90 days to file a petition to the United States Tax Court to further challenge the deficiency. If no response is given within 90 days, the Service will proceed with collection of the amount due.
The following are all matters which can be reviewed by IRS Appeals:
-Disagreements During Audit
-Collection Appeals Procedure (CAP)
-Collection Due Process (CDP)
-Offers in Compromise
-Assessable Taxes and Penalties and Interest
If you or your business is involved in an audit, or if you have been unsuccessful in an audit and need to file an administrative appeal, contact Insight Law and retain an experienced Seattle tax attorney to represent you and/or your business. We are conveniently located in Downtown Seattle and Burien and provide free consultation. The IRS will try to push the process forward. Let Insight Law stop the IRS from rolling right over the top of you.