All you need to know about appealing your IRS findings
The Internal Revenue Service better known as the IRS is the governmental agency that ensures that you “give Caesar what belongs to Caesar”. In other words, it conducts the fundamental function of tax collection on a nationwide scale. And so given the importance of the functions performed by such an agency it is typical that such an organization would keep records, records that may in the future be used for reference when the need arises.
The IRS uses their records to examine tax returns for verification with an aim of ensuring that the government gets from its citizens what is due and that the citizens are not overtaxed as well. But in some cases, this is not the case. Because even the most efficient tax administrators in the world are predisposed to error and there might be an error on your IRS tax examination findings.
In the event that this kind of error is experienced, you can and should dispute by appealing the results of your IRS examination. With a legitimate reason and proper evidence, you could effectively dispute the IRS finding on your examination to a satisfactory conclusion on significant tax savings.
This is why this article has taken the liberty of helping you on how and why you should appeal your IRS tax examination findings, but not without first clarifying what the IRS and the IRS examination is all about.
As already established, the IRS basically collects and keeps records of taxes. Within this fundamental function, it is this bureau’s written responsibility to provide you as the taxpayer top-notch services applicable by helping you understand and perform your tax obligations in fairness and integrity. Most taxpayers diligently file their returns and pay their taxes in compliance with the timely and accuracy requirements of the IRS. And so there is a mandatory expectation that the IRS treats these citizens with the respect and diligence that corresponds to their law-abidingness.
However, there are those that fail to comply either willingly or unknowingly. And it is for this reason that the IRS would from time to time audit tax documents based on potential red flags to verify compliance. In that verification, one might be a victim of wrong examination findings that may cost you more than you owe, and this would be a real problem. As a diligent taxpayer, you do have rights. Rights that are recognized by the IRS and should be known to you so that in the unfortunate event that such a scenario is experienced you should know what to do.
The IRS has a duty to offer taxpayers the highest quality of services which includes assisting you as the taxpayer to understand your responsibilities and rights as a taxpayer. And as a government agency, they are also charged with the obligation to enforce tax laws as stipulated by the constitution. Therefore, it is with such obligations that the following form the IRS’s roles as a government agency;
- Enforcement of the taxpayer’s compliance with the United States tax laws as passed by Congress.
- Educate the taxpayer on stipulated tax laws.
- Ensure that the few who are not in compliance with the tax laws pay their share as dew.
And so even as the IRS works to ensure that they perform these roles to the best of their capacity they are required to consider and comply with the taxpayer’s rights which include;
- Right to professional and courteous treatment by the IRS staff
- Right to representation by oneself or an authorized representative
- Right to privacy and confidentiality about tax matters
- Right to the knowledge as to why the IRS is asking for information, how the IRS will use this information and the consequences if the said information is not provided
- Right to appeal to disagreements, both to the IRS and before courts
It is important for the taxpayer to be aware of these rights especially in the event of a tax audit, since they may come in handy during the process and prove especially efficient when the findings are faulted.
The IRS Examination
The IRS uses a variety of methods to select the taxpayers that they choose to audit. A John Doe may tip the agency off on a potential participation in abusive tax avoidance transaction by a business or company for instance. They also use computer scoring, whereby, some of the highest scoring returns are selected for an audit. The IRS also conducts annual returns on large corporations as a standard examination procedure. Documents that don’t match up – particularly the W-2 employers’ form or the 1099 bank interest statements in correlation to your reported tax return may also trigger an IRS an audit. Also, one can end up on the IRS examination list if there is a connection between them and an already audited party. This connection may be in the form of business partnerships, investments and so on.
Once a taxpayer is selected for an examination the IRS uses certain standard procedures of operation. These procedures include either an in-person interview or via mail review of one’s tax records. For an interview, the audit can be conducted as an office audit or a field audit. As the taxpayer being audited you have the liberty to choose the time and place you would like to be audited from on a schedule most convenient to you. The IRS letter that summons you for the audit is expected to stipulate which documents will be required for the audit. As the taxpayer being audited, you also have the liberty to choose to attend the audit in person or have someone with the proper authorization to attend the audit on your behalf.
If your records are in order and are in full compliance of the IRS tax laws, then have no need to worry. Unless the audit results emerge in a direct contradiction to your expectations. This would then call for the next step, appealing.
Appealing the IRS Examination Findings
In the event that you find your tax audit results are unsatisfactory, then you have the right to and should dispute these findings. There are two ways to go about this matter; you could either appeal directly to the IRS which is a cost-free yet efficient alternative or you could go directly to tax court which is a more costly but a more efficient option. It is, however, recommended that you retain your tax audit attorney for whichever alternative.
Usually, the IRS provides 30 days from the date of the audit findings to appeal. Depending on the size of your tax liability dispute you can request for an appeal in two different forms of letters. A $25,000 or less tax liability would need a simple case informal request letter. In this letter, you are to clarify to the IRS which parts of your audit results you disagree with and why.
For a case with a tax liability that is over $25,000, you are to write a formal letter written in protest to the IRS findings on your tax audit. This protest should entail well laid out information including supporting evidence on how the IRS wrongfully concluded your tax examination. The presence of any substantial new information that was missed in the initial audit as well as any laws supporting your argument should be used in this formal protest.
In conclusion, to err is human and when this phrase becomes an actuality in your IRS tax examination results then the best option is to appeal. This helps to save you an extra cost on taxation because in all honesty, no one wants to pay more taxes than they already do; as if you do not pay enough already. However, there are risks that may be experienced as a result of this appeal which is why it is recommended that you seek and use legal advice from your tax audit attorney before and during the appeal process.
Have a tax question? Contact Venar Ayar.