A couple stressed out while looking over their back taxes and in need of a Washington tax attorney.

If there’s one thing that’s almost as inevitable as taxes, it’s a taxpayer disagreeing with the IRS. Most of these disagreements are probably expressed among family members, friends, and coworkers. But sometimes, these disagreements are more important than getting something off the taxpayer’s chest; there could be a lot of money at stake. This is why there’s a process of challenging the IRS’ decisions, such as a tax assessment or a collection action like a levy

But how do these appeals processes work and when do they apply? Continue reading to find the answers to those and other related questions you might have about IRS appeals. 

When to File an Appeal with the IRS 

If you’re thinking about filing an appeal, it’s most likely because you disagree with:

  • An unpaid tax balance with the IRS.
  • The IRS’ conclusions following an audit.
  • The IRS’ denial of your request to be accepted into a tax program.
  • A penalty the IRS has assessed against you.
  • The IRS’ collection action against you.

You’ll know for sure if you’re eligible to file an appeal if the letter or notice you receive from the IRS indicates you have this right. This document should also explain how to start the appeals process.

You can also only file an appeal if your disagreement is appealable. For example, if your disagreement with the IRS is based on political, moral, or religious grounds, then filing an appeal isn’t likely to be an option.

An appeal also isn’t normally possible if you didn’t provide all the information requested (during an audit), your only problem is that you don’t believe you can afford to pay the amount the IRS is trying to collect from you, or you want to appeal a tax matter where you’ve already signed an agreement with the IRS. That being said, the following concerns can usually be addressed by an IRS appeal:

  • The IRS misinterpreted or misapplied the law.
  • The IRS relied on the wrong facts to make its decision.
  • The IRS misunderstood the facts when making its decision 

Types of Cases Subject to an IRS Appeal 

The following is a list of tax issues that are usually appealable, at least at some point during the application or collection process. Keep in mind that this isn’t an exhaustive list, but it represents the types of cases that taxpayers often appeal.

How to Request an IRS Appeal 

Assuming you’re allowed to appeal an IRS action or decision, you can start the appeals process in one of two ways. With the first option, you can send a formal written protest to the address listed on your IRS letter or notice that contains information about your appeals rights. The formal written protest is where you can explain to the IRS that you want them to make certain changes and the reasons for those changes.

You will use the formal written protest option if your tax disagreement concerns a proposed change in your tax debt (including penalties) that’s more than $25,000 for any tax period. At a minimum, your formal written protest must include the following information:

  • Your name, address, and daytime telephone number.
  • Identification of the relevant tax periods or years.
  • Description of each issue, the reasons you disagree with the IRS, and your proposed changes.
  • The evidence and facts that support your position.
  • The legal authority (case law, statutes, regulations, etc.) that support your position.
  • Your declaration that the information you’ve provided is true and complete to the best of your knowledge, along with your signature.

After submitting this written protest, the IRS Examination or Collection Office that handled the issue you’re challenging will review your protest and try to resolve the matter. If they can’t, your protest will get sent to the IRS Independent Office of Appeals.

The second option is to file a small case request. This method is available if the amount at issue is $25,000 or less. To make a small case request, you can do one of three things:

  1. Prepare a brief written statement explaining why you disagree with the IRS;
  2. Complete the appeal request form included with the letter from the IRS; or
  3. Complete IRS Form 12203, Request for Appeals Review.

These are the general steps to appeal an IRS decision, including decisions following the completion of an audit. However, certain decisions may require a different process. Below are some of these modified appeals processes. 

Collection Appeals Program (CAP) 

The CAP process is available in many types of IRS collection actions, including:

  • Tax liens
  • Property seizure and tax levies
  • Termination, rejection, or modification of installment agreements
  • Disallowance of taxpayer requests to return to levied property

If you’re eligible for CAP and you’ve only had to deal with telephone calls (not involving an IRS revenue officer) and notices from the IRS, then you can begin this appeals process by calling the IRS using the number provided on the IRS notice. During the call, you can explain your disagreement with the IRS and if the person you speak with can’t resolve the disagreement to your satisfaction, you can ask to speak with a Collection manager.

If the Collection manager can’t resolve the dispute, then you can take the next step in the CAP appeals process by having the IRS Independent Office of Appeals review your case. The requirement to speak with a Collection manager before going to the IRS Independent Office of Appeals doesn’t exist if your dispute involves an installment agreement.

If the IRS collection activities have involved you being in contact with an IRS revenue officer, you’ll call the revenue officer and explain why you disagree with them and that you want to appeal their decision. If this telephone call isn’t successful in finding a resolution, you should ask to speak with the Collection manager (this conference with the Collection manager isn’t required if your appeal relates to an installment agreement or you don’t want to advance your appeals to the IRS Independent Office of Appeals). If the Collection manager can’t resolve your appeal, then within three business days of speaking with them, you need to complete IRS Form 9423, Collection Appeals Request and send it to your revenue officer. 

Collection Due Process (CDP) Hearing 

When you receive your letter or notice from the IRS, it will indicate whether you’re eligible for a CDP hearing with the IRS Independent Office of Appeals. This usually occurs when the IRS is trying to use a tax lien or levy to collect a tax debt from you. More specifically, you’ll usually request a CDP hearing when the IRS sends you a:

  • Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320
  • Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing
  • Notice of Jeopardy Levy and Right of Appeal
  • Post Levy Collection Due Process Notice
  • Final Notice – Notice of Intent to Levy and Notice of Your Right to A Hearing

When you receive the relevant notice from the IRS, you’ll usually have 30 days to request the CDP hearing with the IRS Independent Office of Appeals. You make this request by completing IRS Form 12153, Request for a Collection Due Process or Equivalent Hearing and sending it to the address shown on your CDP notice. If you disagree with the decision from the IRS Independent Office of Appeals, you can ask for another appeal with the U.S. Tax Court.

It’s important to submit Form 12153 on time. If you submit it late (but still within the one-year period described on Form 12153), you can still receive an appeals hearing with the IRS Independent Office of Appeals, but you lose your right to appeal that decision to the U.S. Tax Court if you disagree with it. 

Appealing an Offer in Compromise (OIC) Rejection 

When you receive the letter from the IRS notifying you that it rejected your OIC, you have 30 days from the date listed on that letter to appeal the decision. You’ll file this appeal by either completing IRS Form 13711, Request for Appeal of Offer in Compromise or by providing the IRS with the following information:

  • Your name, address, daytime telephone number, and tax ID.
  • A declaration informing the IRS that you want to appeal the OIC rejection to the IRS Independent Office of Appeals.
  • The tax periods involved in your appeal.
  • A copy of the OIC rejection letter the IRS sent you.
  • A list of the specific issues you disagree with and why you disagree with the IRS.
  • Facts and legal authority that support your position.
  • You affirm that the information you provided is true and complete and provide your signature. 

Appealing an Innocent Spouse Relief Determination 

Either spouse may appeal the IRS’ decision, which means you can appeal the fact that the IRS granted your spouse innocent spouse relief or the fact that they denied your request for innocent spouse relief. To appeal the decision, you must complete IRS Form 12509, Innocent Spouse Statement of Disagreement within 30 days of the date of the preliminary determination letter the IRS sends to you and your spouse.

You’ll need to send Form 12509 and any supporting documentation to the address provided in your preliminary determination letter. The IRS then reviews the information and sends you and your spouse a final determination letter. If you still disagree with the IRS, you can petition with U.S. Tax Court for judicial review within 90 days from the date of the final determination letter. 

Appealing an IRS Penalty 

If the IRS imposes a penalty, such as a trust fund recovery, failure-to-pay, or failure-to-file penalty, you can ask for penalty abatement. If the IRS denies your request or it’s not available, then you’ll begin the appeals process by submitting a formal written protest or small case request as discussed above. When appealing a trust find recovery penalty, you’ll also need to:

  • Provide a copy of Letter 1153, Proposed Trust Fund Recovery Penalty Notification;
  • Explain why you disagree with the penalty amount or the fact that you have to pay any penalty (if one or both are applicable);
  • Explain your duties and responsibilities; and
  • Cite the applicable legal authority that supports your case.

You’ll give this information to the IRS employee whose name and address have been provided in your Letter 1153. 

Alternatives to an IRS Appeal 

There are two main options for resolving a disagreement with the IRS without filing a formal appeal. First, there’s mediation. This is where an IRS appeals officer serves as a mediator between you and the IRS to find a resolution to your disagreement. The advantages of mediation are that it’s optional, confidential, and nonbinding.

The key to making the most of the mediation process is to understand that it’s not about winning against the IRS. Instead, it’s about trying to facilitate communication between you and the IRS so a negotiated settlement is possible.

Second, there’s litigation. For example, your dispute with the IRS may give you the right to file a petition with the U.S. Tax Court without having to first file an appeal. Just remember that going to court will usually take longer and be more expensive than resolving your dispute through the appeal or other available dispute resolution options. 

How a Tax Professional Can Help You with Your IRS Appeal 

Not all disagreements with the IRS require special forms or hearings to settle. Sometimes the disagreement can be resolved with a simple telephone call. But often, a more complicated appeals process is necessary. In these situations, it’s a good idea to talk to a tax pro to get a better idea of what you’re dealing with and what your options are. 

The tax professionals from Seattle Legal Services, PLLC will be more than happy to hear about your tax issue and help you figure out what you can do to resolve it. If you want solutions to your tax problems, call us at 425-428-5262 or contact us online.