What are dividends and how are they taxed? What is the basis of property acquired by gift? What is the generation-skipping transfer tax? Is an early distribution from a retirement plan taxed? How is the gain or loss on the sale or transfer of a capital asset determined? What are the tax consequences of the sale of a principle residence? What are the rules for deducting home office expenses? Do I have to pay US income tax on money I earned in a foreign country? What are the reporting requirements for businesses with respect to independent contractors? Are any taxpayers exempt from paying property taxes?

Can I Appeal an IRS Finding?

Can I Appeal an IRS Finding?

If you do not agree with the findings of the Internal Revenue Service (IRS), you may be able to file an appeal. For example, if after an audit, the IRS concludes that you owe additional taxes, you can appeal this decision. If you do not agree with IRS findings, the first step is to request a meeting with the supervisor of the person who issued the findings. If you still do not agree with the findings after discussing the case with the supervisor, you can appeal the case to the local IRS Appeals Office. The Appeals Office is separate from the IRS division that made the decision with which you disagree.

Conferences between taxpayers and Appeals Office representatives are generally informal. You can opt to have a representative such as an attorney, certified public accountant or person who is authorized to practice before the IRS. The conference is not recorded by a court reporter and testimony is not given while under oath. However, any facts you allege must generally be declared to be true under penalty of perjury.

If your case involves certain issues, you may need to file a formal written protest or a small case request in addition to requesting an appeals conference. A written protest is required if:

• Your case involves an employee plan or exempt organization;
• Your case involves a partnership or S corporation; or
• Your case does not qualify for the small case request procedure or other special appeal process.

The Appeals Officer will typically ask you to propose a settlement offer. If it is not accepted, the Appeals Officer will propose his or her own settlement amount to you. If the parties reach a settlement agreement, the Appeals Officer prepares a report detailing the settlement amount, the issues, the evidence presented and the reasons supporting the settlement. You will then receive a bill for the agreed amount.

After the conference, the IRS will send you a “30-day letter,” which explains the IRS’s findings and your right to appeal within 30 days. You can then elect to pay any deficiency and then later contest the findings in court; ignore the letter and file a case in court after the IRS sends the “90-day letter;” or protest the 30-day letter and continue administrative proceedings within the Appeals Office with an eye toward settlement.

If an agreement is not reached through administrative channels, as noted above, you may be able to take your case to the United States Tax Court, the United States Court of Federal Claims or a United States district court if you meet certain procedural and jurisdictional requirements. The US Tax Court has jurisdiction over disputes relating to whether a taxpayer owes additional income tax, estate tax, gift tax, certain excise taxes and penalties related to those proposed taxes. The IRS will send the taxpayer a notice of deficiency stating the amount it believes the taxpayer owes, and the taxpayer has 90 days to file a petition with the US Tax Court. Claims for refunds can be heard in the US Court of Federal Claims or a US district court after the taxpayer has paid the tax and filed a claim for a refund with the IRS.

If you prevail in your dispute with the IRS, you may be able to recover reasonable litigation and administration costs. To recover these costs, you must have exhausted all administrative remedies within the IRS and not unreasonably delayed the proceedings. The recoverable costs may include attorneys’ fees, court costs, reasonable expenses of expert witnesses and reasonable costs of analyses or tests that are needed to prepare the case. A prevailing party is a party that substantially prevailed on the amount in controversy or the most significant tax issue and that meets the net worth requirement. For individuals, net worth cannot be more than $2,000,000 on the date from which costs can be recovered.

Copyright © 2008 FindLaw, a Thomson Reuters business

DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent counsel for advice on any legal matter.

View Previous Months Selection