Resolution of a Taxpayer’s dispute varies dependent on the type of dispute and where the dispute is in the process. This section provides an overview of some of the types of review and appeal available and when they are appropriate based on the type of dispute and timing.
The IRS uses four methods of examinations: correspondence exams, office exams, field exams and employment tax audits. Clients of the clinic are most often audited by correspondence exams. The other three methods are rarely seen in the clinic. Correspondence exams are conducted through the mail. Usually, the IRS will request that the taxpayer explain or send supporting documents to substantiate or clarify certain claims and matters.
In many instances, clients who come to the the clinic for assistance have already passed the audit stage, either because they have ignored the IRS notices or because they have not provided the IRS with sufficient evidence to resolve the dispute.
Audits are resolved in one of two ways: taxpayer’s agreement with the IRS’ findings or taxpayer’s disagreement with the findings. Clients who come to the clinic usually do not agree with the results of the examination. The IRS will issue a notice to the taxpayer called the 30-day Letter that will state the findings of the examiner and the taxpayer’s appeal rights. Taxpayer will have 30 days from the date of the 30-day Letter to request a conference with the Appeals Office. If the taxpayer does nothing, then she will be sent a 90-day Letter (Statutory Notice of Deficiency).
Documents at IRS.gov
30 Day Letter
Documents at IRS.gov
Handling Response to Pre-Assessment 30-day letter: The Protest
- If the total amount of proposed additional tax, proposed over assessment or claimed refund exceeds $10,000 for any taxable period, a written protest setting forth the facts, law, and arguments relied upon by the taxpayer, made under penalties of perjury, is required.
- If the total amount of proposed additional tax, proposed over assessment, or claimed refund exceeds $2,500 but does not exceed $10,000. A brief written protest of disputed issues is required.
- An oral protest is sufficient to obtain Office of Appeals consideration in field audit cases involving $2,500 or less and in all office interview or correspondence examination cases. However, it is customary for the Clinic to submit a written protest.
A protest should include the following:
- Taxpayer’s name, address and Social Security number
- Taxpayer’s Representative’s name and a copy of Form 2848 Power of Attorney
- Copy of or reference to the 30-day Letter and the audit report identifying the tax years involved and the proposed changes
- Statement that the protest is timely
- Request for an Appeals conference
- List of the changes made by the IRS to the taxpayer’s return that taxpayer disagrees with and why taxpayer disagrees
- Facts supporting taxpayer’s position
- Law or authority on which taxpayer bases his position
- Taxpayer’s signature or representative’s statement that she prepared the protest and knows the facts alleged to be true (to the best of their knowledge)
- Supporting documents may be attached
Appeal of Claim Disallowance
In addition, a request to the IRS for them to allow some additional claim on a return or to reconsider a disallowance of a prior claim may result in the IRS not granting that request and issuing what is termed a “Claim Disallowance” letter. The student should contact the IRS and clarify precisely what was denied. In many instances, while the letter indicates a denial of the claim, in fact the claim was allowed in part. Then the student must determine if the amount disallowed was erroneous.
As in many actions with the IRS, those decisions can be appealed to the Appeals Division The Form 12203 is the general form used to appeal a matter to the Appeals Division except for appeals of offers in compromise (see OIC section for appeals of officers).
Generally, the IRS allows 30 days from the date of the “Claim Disallowance” letter to request Appeal’s consideration. Therefore, the cover letter and the form 12203 should be returned within the 30 days even if there is not sufficient time to prepare an appeals notebook. Once the Form 12203 is returned timely, the student should immediately prepare the appeals notebook following the example format for appeals notebooks found on this website and have it ready, when an appeals officer is assigned.
Should the IRS overlook the request for a face-to-face conference with Atlanta Appeals, upon contact by an appeals officer in a city other than Atlanta, the student should without further discussion of the underlying issues in the case, request a face-to-face conference with Atlanta Appeals.
- Sample Appeals Memorandum.doc
- Appeal of Claim Disallowance Cover Letter
- Request for Appeals Review (Form-12203)
- Treas.Reg. §601.105: Examination of returns and claims for refund, credit or abatement; determination of correct tax liability
- Treas.Reg. §601.106: Appeals Function
Documents at IRS.gov
Statutory Notice of Deficiency
The 90-Day Letter that is a Statutory Notice of Deficiency should not be confused with other 90-day letters, including the one required when innocent spouse relief is denied. § 6015.
The statutory notice of deficiency grants the taxpayer 90 days within which to petition the Tax Court to re-determine the liability that is proposed by the examining agent. If the issue involves filing status and if the taxpayer was married during the year in question but did not file a joint return, consider having the taxpayer file a joint return before the petition is filed. See IRC § 6013(b)(2)(B). Once a petition is filed, a joint return is no longer permitted to be filed.
Because the 90-day period is prescribed by statute, it cannot not be extended. For this reason and to preserve the rights of the client, it is extremely important not to miss the 90-day deadline. If a student overlooks this time limit he or she may receive a failing grade in the clinic course.
The 90-day period within which a petition may be filed is counted from the date the notice of deficiency is mailed to the taxpayer’s last known address. The IRS is required by law to include on the notice the last day a petition may be filed. IRC § 6213. During the 90-day period, the IRS is barred from any assessment or collection activity. If taxpayer files a petition, this continues until a Tax Court decision is final. IRC § 6503(a)(1). Failure to file a petition with the Tax Court will result in the deficiency being assessed. This is one of the steps the IRS takes before collection efforts begin.
Internal Revenue Code
- IRC §6212 Notice of Deficiency
- IRC §6213 Restrictions applicable to deficiencies; petition to Tax Court
- IRC §6503 Suspension of Running off Period of Limitation
The completed notebook is sent to the appeals officer reviewing the case a couple weeks before the scheduled conference. An extra copy of the entire notebook must be retained in the client’s file and the legal memorandum must be saved on the T-drive in the client’s folder.
- Appeals Memorandum
- Appeals Notebook Cover Letter
- Appeal of Claim Disallowance Cover Letter
- Protest to 30-Day Letter
Protest to 30-Day Letter
Conferences with the appeals officer are held in an informal manner by correspondence, by telephone or in person. Any conference with the IRS regarding your client will require the attendance/participation of the associate director. Therefore, you should confirm that the associate director is available before scheduling any conference. Also, please note that professional attire is required at all conferences conducted in-person.
Collection determinations may also be reviewed by the Office of Appeals. The Office of Appeals will determine if the collection procedures are reasonable, whether all avenues have been considered and whether the IRS has complied with required procedures. There are two methods in which collection determinations may be appealed: administratively or statutorily.
The Collections Appeals Procedure (CAP) is an administrative appeal that allows taxpayers who were subject to a lien, levy or seizure or who were defaulting on their installment agreements to request an appeals conference. The Collection Due Process (CDP) hearings were created by the 1998 Reform Act to give taxpayers a statutory right to appeal collection actions. If the appeal is denied, a petition can be filed in the Tax Court. See the links below for further explanation of these two procedures.
The Office of Appeals reviews the matters in controversy without any bias. It is the mission of the Office of Appeals to resolve these matters and avoid litigation. An appeals officer is allowed to take into account the hazards of litigation in reaching her decision. Approximately 85 percent of the cases reviewed by the Office of Appeals are settled.
Although taxpayers may request a conference upon receipt of an administrative 30-day letter, most of the appeals conferences involving the clinic clients stem from statutory notices. These statutory notices include a Notice of Deficiency, a Notice of Lien, a Notice Before Levy, and a determination denying innocent spouse relief.
Once the administrative file is assigned to an appeals officer. The student attorney twill be contacted to schedule a conference. The conference is an opportunity for the IRS and the taxpayer to try to settlement the case prior to a trial in the U.S. Tax Court.
After the appeals officer makes his or her decision, the student attorney may notify the client of the decision but should clarify to the client that the appeals officer’s decision is not final in docketed cases until a stipulation is filed with the Tax Court. Once the Tax Court receives the stipulation, we must still await a final decision from the Tax Court.
If the appeal results from filing a petition to receiving a decision from the Tax Court generally takes several months. If the client is entitled to a refund because of the appeal, he or she may not receive the refund until 10 to 12 weeks after the decision of the Tax Court is rendered. The student attorney needs to inform the client that the process takes several months.
- Appeals Notebook (above)
- Collection Appeals Procedure (CAP)
- Collection Due Process
- Decision Tree