Appealing The IRS Tax Due Notice
Case Example:
Q. I am an independent contractor. I just received an IRS Notice of Deficiency regarding my previous year’s tax returns. The IRS is claiming I owe them nearly $12,000 in back taxes. They would like me to set up a payment plan, but I would instead dispute their claim. Am I entitled to appeal their decision?
A. Yes. The appeal process typically begins with the taxpayer receiving one of two of the following types of letters:
General 30-Day Adjustment Letter
This letter is the most common form of a letter sent to taxpayers. It provides you with their calculation and what they call a “proposed adjustment” to your tax return.
If you disagree with their adjustment figures, you must file a Request for Appeal with the IRS. You will be required to file your appeal within 30 days from the date of your letter and return it to the IRS Office of Appeals.
It is strongly advised that you retain a tax defense professional to do this for you, including representing you throughout the appeal process.
Notice of Deficiency Letter
This IRS letter states that you have underpaid and owe them additional money. It explains how to dispute the deficiency if you disagree with their findings.
The IRS provides that if you wish to challenge their findings, they require that you first telephone or personally meet with them and try to resolve the dispute informally.
Again, it is recommended that you first retain a tax defense professional to represent you, irrespective of whether the IRS calls such meetings informal. Your professional representative should conduct all meetings and communications – including emails and telephone calls.
At the resolution meeting, your personal attendance is not legally required.
Should your representative’s meeting with the IRS not result in a resolution, your representative can then appeal their decision with the IRS Appeals Office.
To dispute their underpayment claim, a petition will need to be filed with the Tax Court within 90 days from the notice date.
IRS notices or letters should never be ignored
If you do nothing, which is never advised, you will receive an IRS Bill for the amount of taxes they claim you owe, and they will begin formal collection actions against you. Collection can include but is not limited to the following:
- Tax levies on your bank account
- Seizure of your property
- Garnishment of your wages
Collection actions also include fines and penalties.
Ninety-day deadline to appeal is strictly enforced
You must act as fast as possible if you are under the 90-day deadline. Do not wait until a month before the 90-day deadline to consult with a tax professional.
The court almost never permits late filings Remember that the IRS will object to a “late filing” of your appeal, and the court will dismiss your case without hesitation.
If you pass the deadline, you may be able to file your case in another federal court, but you will have to pay the tax first and sue the government for a refund. A process you certainly want to avoid if at all possible.
If you have questions about the appeal filing process and requirements, you can check online at the U.S. Tax Court’s website.
US tax court
Assuming you choose to appeal your income tax dispute, you will be filing your appeal with the U.S. Tax Court. Upon filing your request, the court will notify you of a trial date, and you will be expected to appear to present your case in full. You may represent yourself or retain a tax attorney or other approved advocate to present your case for you. Again, having a professional represent you is highly recommended. Disputed tax issues can be challenging to navigate without professional training and experience.
Settlement before trial
Based on recent statistics, nearly 90% of all IRS cases settle before trial. It is not unusual, therefore, for the IRS representative to have a counter-offer already prepared and authorized by the IRS. Unfortunately, there is still too much deception in the tax litigation process; your representative must be ready to try your case.
IRS Tax lawyers usually carry large caseloads and neither have the time nor resources to prosecute every assigned case. So if your representative has made some good arguments in your petition, there is a good chance the case will be settled.
The IRS tax attorney will prepare a Stipulated Tax Court Decision if you settle. The taxpayer, IRS attorney, and judge must execute this document to resolve the case officially.
For more information, consider consulting with an experienced tax advisor.
