What are My Federal Income Tax Appeal Rights?

If your federal income return is audited by the IRS, you may appeal any proposed assessment of additional income tax, penalty and interest.  In any appeal to the IRS or to the courts, you may represent yourself, or you may be represented by a tax attorney, CPA or other authorized representative.

If you do not agree with any changes proposed by the IRS, you may choose to start the appeal process by having a conference with the auditor’s manager, or you may choose instead to appeal the proposed assessment immediately to the IRS appeals office.  There is generally no reason not to ask for a conference with the auditor’s supervisor.  You may win at this level.  And there is generally no reason not to appeal any proposed assessment to the IRS appeals office if you do not win at the supervisor conference level. 

If you do not reach a satisfactory resolution at the supervisory conference level, or you choose to skip this supervisory review, you have 30 days to your next course of action.  If you wish to appeal the proposed assessment to the IRS appeals office, you must submit a letter stating the relevant facts of the case and asking for the IRS appeals office to review the case.  If you do not respond within the 30 day period, the IRS will issue a statutory notice of deficiency, and you will then have 90 days to file a petition to the United States Tax Court. 

If you choose to appeal your case to the IRS appeals office, you will have an opportunity for a hearing and a chance to submit evidence to support your position.  The IRS appeals office will eventually issue a final assessment which either supports your position, or the position of the IRS auditor, or something else.  If you do not agree with the final assessment made by the IRS appeals office, or you do not file a request for review by the IRS appeals office, you have 90 days to file a petition with the United States Tax Court.  You also have a right to file an appeal in the United States Claims Court or the United States District Court, but these courts generally do not hear tax cases unless the proposed tax has been paid and you are seeking a refund.  To the contrary, the proposed tax does not have to be paid to appeal within the IRS or to the Tax Court.  A case may be further appealed to the U.S. Court of Appeals or to the Supreme Court, but only if those courts accept the case. 

If your tax return is being audited, you should consult with a tax professional.  Please call or email me to discuss any questions you have about your federal income tax appeal rights.    Jsenney@pselaw.com or 937-223-1130. 

AND ONE MORE THING.  This is a good time to consider making gifts of appreciated assets. Many assets are still being traded or valued at relatively low prices. If these assets are expected to increase in value over time, and you intend to transfer such assets to the next generation at some point, now might be the right time to gift such assets.  If you own a closely-held business which you intend to gift to the next generation, year-end is a great time to transfer a minority ownership interest in such business. You can take a business valuation discount on the transfer of such stock, you can do a transfer effective as of December 31 and then do a second transfer effective as of January 1 using the same valuation for both, and you can take advantage of annual gift exclusions for both 2011 and 2012.  Give me a call or email at Jsenney@pselaw.com or 937-223-1130 if you want to talk about year-end gift tax planning.

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