Taxation & Estate Planning

IRS auditor giving you trouble? Where else can you turn?

By howardlevy

It is common to feel like you are not getting a fair shake from an IRS auditor.   Frustration mounts with perceptions that the auditor is unreasonable.  No matter what you do, the auditor cannot be satisfied.  You are told you owe money to the IRS, and you know you don’t.

There is good news – IRS auditors are not the end of the road.

Before the IRS can finalize an audit, they are required by law to give you rights to dispute it in federal Tax Court and with an IRS appeals officer.

Before the audit becomes final, the IRS must notify you of your rights to dispute it.  This letter called a “Notice of Deficiency.” The Notice of Deficiency gives you a very important legal right – to take the IRS audit to Tax Court and have an independent judge review it.  You will have 90 days to file a “petition” to Tax Court after the IRS sends you the notice of deficiency. If the 90 days has already expired, you may qualify for audit reconsideration instead.

Before the IRS goes to trial, they will send your case to an IRS Appeals Officer for settlement.  The IRS Appeals Officer’s job is to settle the case based on how a judge would rule, not an auditor.  IRS Appeals Officers have flexibility not always shown by IRS auditors.  Most IRS examination cases settle this way with results not available from an auditor’s point of view.

Tax Court judges and IRS appeals officers perceive cases differently from IRS auditors.  If you are right, you can testify to it – summarize to the appeals officer what you will tell the judge. If the IRS – in preparation for trial – sees that their auditor was being unreasonable, they will most likely make attempts to settle the case on the basis of how an independent judge would rule.

The auditor often has a small view of your case and does not consider how outsiders would decide it; that changes when the final decision is not that of the IRS, but is put in the hands of the Tax Court.

Full post as published by IRS and the Law on September 22, 2009 (boomark / email).