One of the hallmarks of our country is the concept of due process. This refers to following the law when a government takes action against an individual. And if there is ever a time when the government takes action against an individual, it’s when they’re taking the individual’s money.
That’s why the IRS has an appeals process in place, to ensure that a tax decision against an individual has been properly made in accordance with the relevant tax law. This blog post will provide an overview of the appeals process and explain how it works.
What the Appeals Process Is For
The purpose of the IRS appeals process is to settle tax disputes in an efficient and informal manner. A taxpayer can avoid this appeals process and go straight to Tax Court to settle a legal dispute. However, the court process can take much longer and cost more money to resolve.
Not all tax disputes are able to go through the appeals process. If a taxpayer disagrees with the IRS on the following grounds, then they may not use the IRS appeals process:
- The taxpayer doesn’t have the money to pay off his or her tax debt, or
- The dispute over the tax liable is grounded on political, religious, conscientious, moral or constitutional grounds.
How to Tell if a Dispute Can Be Appealed
Unfortunately for the taxpayer, the IRS appeals process isn’t available in all tax disputes. The IRS will only accept appeals when the following three conditions are met:
- The taxpayer does not sign an agreement form sent by the IRS,
- The taxpayer disagrees with the IRS’ decision, and
- The letter from the IRS specifically sets out the taxpayer’s right to appeal.
If even one of those conditions is absent, no appeal is possible. Most appeals will involve disagreements over the following issues:
- Tax adjustments
- Trust fund recovery penalties
- Tax penalties
- Offers in compromise
Filing an Appeal
A taxpayer starts the appeals process by requesting an appeals conference at the taxpayer’s local Office of Appeals. This conference is very informal and involves exchanging information between the taxpayer and the IRS. Often, this includes additional documentation concerning the taxpayer’s legal arguments and the underlying facts.
Appeals conference can be completed in several ways, including over the telephone, through letters or in person. The IRS is currently in the process of experimenting with using videoconferencing technology to conduct the appeals conferences. When filing an appeal, the taxpayer must choose the right form of appeal.
First is the Small Case Request which is used when the tax amount in dispute is $25,000 or less. While the exact process for filing an appeal for a Small Case Request can vary for each taxpayer, it generally includes completing a written request outlining the reason for the dispute and the basis the taxpayer has for believing the IRS is wrong.
Second is the written protest. When submitting a written protest, the taxpayer will include the same information as a Small Case Request, but also:
- The taxpayer’s name, address and telephone number.
- A penalties of perjury statement (this basically tells the taxpayer that if they lie, they could be guilty of perjury).
- Identification of tax years at issue.
- A copy of the letter from the IRS concerning the tax dispute.
- The tax years at issue.
- The taxpayer’s signature.
Hiring a Tax Professional for the Appeal
A taxpayer doesn’t have to hire a tax professional to represent them during the appeals process, but it can be very beneficial to do so, especially when it involves complex legal arguments or there is a lot of money is at stake.