Taxation & Estate Planning

Four ways to handle disagreements with IRS auditors

By howardlevy

A common problem with IRS audits is not seeing eye to eye with the auditor. The auditor sees the case narrowly, while you see the big picture.  You know you incurred that expense or did not have unreported income, but the auditor’s criteria is difficult to satisfy.

Here are some ways to get problem IRS audits resolved:

1.   Try to work it out with the manager.  Every auditor has a manager. Sometimes, a call to the manager can resolve thorny issues.   

2.   Take the case to IRS appeals.  IRS Appeals Officers settle cases on what is known as the “hazards of litigation” - meaning if you went to Tax Court, what would an impartial judge say about your case?  Auditors rarely consider that, which is often the cause of the bottleneck.  

3.   Go directly to Tax Court.  If you are at a standstill, request that the auditor close the case out and issue a Notice of Deficiency so you can take your case directly to Tax Court.  

An advantage to going to Tax Court first and then conducting settlement negotiations is that the trial is real.  The “reality” of a pending trial can help negotiations, especially if the IRS evidence is weak. See my prior post “Tax Court - providing a level playing field in IRS audits.”

4.  If you already are getting billing notices from the IRS, request audit reconsideration.  If you did not take advantage of going to IRS Appeals or Tax Court and you are getting billing notices for an amount you do not owe, you can still request that the IRS reconsider the audit after the fact.  You do not need to overpay your liability if you have documentation that supports your position and it was not adequately considered during the audit.     

Full post as published by IRS and the Law on June 04, 2009 (boomark / email).