When the IRS suspects irregularities in your tax returns, it investigates further and might levy a penalty on you; if this happens when you had made a genuine error in your return or due to certain special circumstances, you can opt for IRS appeals to get your penalty revoked or reduced. All those who file tax returns have a right to appeal against the IRS order. This helps settle a majority of cases without recourse to a court case. However, the IRS appeals system permits only certain grounds for an appeal. There are two types of appeals permitted by the IRS.
Small Case Request
You can request a small case if in none of the tax periods under consideration the total amount payable to the IRS including tax, penalty, and interest is more than $25,000. In such cases you can use the Letter 950 to request a conference with the appeals officer. At the conference you need to be represented by an attorney, a certified public accountant, or an enrolled agent. A tax preparer can be a witness, but cannot represent you. As most cases are settled at this level, you and your representative need to be prepared to answer all relevant questions.
The request for a small case needs to be in writing. The letter should outline your case by listing the changes you do not agree with and explaining your rationale for the disagreement. This letter needs to be sent on time – normally within 30 days of receipt of the notice from the IRS.
A Formal Protest
The request for a hearing under the formal protest mode must include information about the taxpayer and the reasons for the appeal. When you are making a formal protest, you need to ensure that you include your name, your address, and a daytime telephone number where you can be reached. Besides, you need to furnish the following details:
- Make a statement saying you are appealing the IRS findings
- Include a copy of the tax adjustments proposed by the IRS
- Information detailing the tax years for which you dispute the IRS findings
- A list of changes that you disagree with and your reasons for the same
- Facts supporting your case
- The specific rule based on which you are appealing
The tax payer must also sign the appeal under the penalties of perjury. If a representative is signing on behalf of the tax payer, they too need to declare the authenticity of the facts presented.
Retaining a Lawyer
As you need to be represented by either a legal or accounting professional before the appeals office, it is best to retain a lawyer to represent you. A lawyer who is familiar with the appeals process will be able to elicit the facts from you and present your case convincingly to the appeals officer.
