The Appeal System
Because people sometimes disagree on tax matters, the Service has an appeal system. Most differences can be settled within this system without going to court.
Reasons for disagreeing must come within the scope of tax laws, however. For example, an appeal of a case cannot be based only on moral, religious, political, constitutional, conscientious, or similar grounds.
A case may be taken directly to tax court if the taxpayer does not want to appeal within the IRS.
Appeal Within the IRS
The tax decision reached by the examiner may be appealed to a local appeals office, which is separate and independent of the IRS Office that conducted the examination. An appeals office is the only level of appeal within the IRS. Conferences with appeals office personnel may be conducted in person, through correspondence, or by telephone with the taxpayer or its authorized representative
Instructions for requesting a conference with an appeals officer are provided in the letter of proposed tax adjustment. In FSLG, the Letter 950 is generally used to propose adjustments to employment taxes. It states that to request a conference with an appeals officer, the taxpayer will need to file either a small case request or a formal written protest with the contact person named in the letter. Whether you file a small case request or a formal written protest depends on several factors.
If a conference is requested the examiner will send the conference request letter to the appeals office to arrange for a conference at a convenient time and place. The taxpayer or its qualified representative should be prepared to discuss all disputed issues at the conference. Most differences are settled at this level.
Only attorneys, certified public accountants or enrolled agents are allowed to represent a taxpayer before Appeals. An unenrolled preparer may be a witness at the conference, but not a representative.
Making a Small Case Request
A small case request is appropriate if the total amount of tax, penalties, and interest for each tax period involved is $25,000 or less. If more than one tax period is involved and any tax period exceeds the $25,000 threshold, a formal written protest for all periods involved must be filed. The total amount includes the proposed increase or decrease in tax and penalties or claimed refund.
To make a small case request, the instructions in the letter of proposed tax adjustment provide that the taxpayer should send a brief written statement requesting an appeals conference and indicate the changes with which it does not agree with and the reasons it does not agree with them.
Be sure to send the protest within the time limit specified in the letter you received, which is generally 30 days.
Filing a Formal Protest
When a formal protest is required, it should be sent within the time limit specified in the letter. The following should be provided in the protest:
- Taxpayer’s name and address, and a daytime telephone number.
- A statement that taxpayer wants to appeal the IRS findings to the Appeals Office.
- A copy of the letter proposed tax adjustment.
- The tax periods or years involved.
- A list of the changes that the taxpayer does not agree with, and reason for disagreement.
- The facts supporting the taxpayer’s position on any issue that it does not agree with.
- The law or authority, if any, on which the taxpayer is relying.
- The taxpayer must sign the written protest, stating that it is true, under the penalties of perjury as follows:
“Under the penalties of perjury, I declare that I examined the facts stated in this protest, including any accompanying documents, and, to the best of my knowledge and belief, they are true, correct, and complete.”
If the taxpayer’s representative prepares and signs the protest for the taxpayer, he or she must substitute a declaration stating:
- That he or she submitted the protest and accompanying documents and;
- Whether he or she knows personally that the facts stated in the protest and accompanying documents are true and correct.
Additional information about the Appeals process may be found in Publication 5, Your Appeals Rights and How to Prepare a Protest if you Don’t Agree.