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How to appeal an audit
By Andrea
Terry Abramowitz • Bankrate.com
 For
people who disagree with the results of a tax examination, also
referred to as an audit, the Internal Revenue Service has an appeals
system. In many cases, appealing an audit results in some savings,
but there are some drawbacks.
Pros of appealing an audit:
- It's simple and costs nothing -- unless you
use a tax professional.
- In the majority of cases, it results in some
savings, although rarely a total victory.
- It delays your audit tax bill by months,
buying you time to raise cash if need be.
Cons of appealing an audit:
- An appeals officer can raise issues the auditor
missed, but this almost never happens. If you're afraid that something
will be discovered and you'll owe more in taxes, skip the appeal
and go to Tax Court, where new issues can't be raised. Consult
a tax professional before skipping the appeal.
- Interest on your tax bill continues to grow
while you're appealing.
If your audit was conducted through a personal
interview with an IRS employee, the employee will explain your appeal
rights to you. If you disagree with the findings, you may request
a meeting with the employee's supervisor. If you still don't reach
an agreement, or if the examination was conducted through correspondence,
the IRS will provide you with a report and/or letter that explains
the proposed adjustments and informs you of your right to request
a conference with an appeals officer. The letter will also tell
you how to make your request. If you request an appeals conference,
be prepared to support your position.
In addition to examinations, many other things
can be appealed. Among them are penalties, including the trust fund
recovery penalty, offers in compromise, employment tax adjustments,
liens, levies, seizures and abatement of interest.
To appeal an audit:
- Start by writing a protest letter and sending
it to the local IRS district director.
- Make a Freedom of Information Act request
for the auditor's records.
- Show the appeals officer that you would have
some chance of winning if you went to court.
- Negotiate tax issues, not tax dollars.
- Prepare with careful record organization
and basic tax law research.
Appeals conferences are informal meetings. You
may represent yourself at an appeals conference or, if you want,
you may have an attorney, a certified public accountant or an individual
enrolled to practice before the IRS represent you. If you don't
reach an agreement with the appeals officer, or you don't wish to
appeal within the IRS, you may take your appeal into the courts.
Your taxpayer rights, the audit process and
how to appeal are explained in IRS Publication
1, Your Rights as a Taxpayer; Publication
5, Your Appeal Rights and How to Prepare a Protest if You
Don't Agree; and Publication
556, Examination of Returns, Appeal Rights, and Claims for
Refund. If it goes so far that the IRS begins collection procedures,
check out Publication
1660, Collection Appeal Rights (for Liens, Levies, and Seizures),
discusses how you can appeal those actions.
-- Updated: March 21, 2003
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