Appeal an IRS Audit or Tax Bill – Explained

You’ve completed an IRS audit — or received an IRS notice saying you owe more tax — and you disagree with the result. Maybe the IRS disallowed legitimate deductions, misinterpreted your documents, inflated your income using indirect methods, or issued penalties that simply don’t apply.

Here’s what most taxpayers don’t know → You have the right to challenge ANY IRS proposed assessment — without paying first.

📘 References:

• IRS Independent Office of Appeals
• Publication 556 — Examination of Returns
• Publication 1 — Taxpayer Rights
• Publication 3498 — Examination Process

What Does It Mean to “Appeal” an IRS Audit or Tax Bill?

Appealing an IRS decision isn’t just about arguing; it’s about asking the Independent Office of Appeals to take a fresh, impartial look at your case. This process is designed to resolve disputes efficiently, helping you avoid litigation and immediate payment demands.

Under federal law (IRC §7803(e)), the Office of Appeals is legally required to:

• Accept New Arguments: You have the right to present new legal theories or facts to support your case.
• Remain Independent: They are separate from the auditors who examined you.
• Provide Impartiality: They must review your case fairly, without bias toward the IRS.
• Weigh Litigation Risks: They consider the “hazards of litigation”—meaning if the IRS is likely to lose in court, Appeals is more likely to settle.

📘 References: § 7803 – Commissioner of Internal Revenue; other officials

When You Can Appeal an IRS Audit or Tax Bill?

Generally, you have the right to appeal almost any IRS decision that changes your tax liability or involves collection actions. These disputes typically fall into three categories:

• Adjustments to Your Return: Proposed additional taxes, changes to reported income, or disallowed credits and deductions.
• Penalties: Charges for late filing, late payment, negligence, fraud, or accuracy-related issues.
• Business & Collections: Employment tax classification, Trust Fund Recovery Penalties (TFRP), summons enforcement, and collection actions like liens and levies.

The Office of Appeals handles most cases, but they will not review:

• Criminal tax investigations.
• Arguments deemed “frivolous” or lacking legal basis.
• Issues where Congress has removed appeal jurisdiction.
• Collection cases where you do not have Collection Due Process (CDP) rights.

Potential Reasons to Appeal

Appealing is appropriate if any of the following apply to your case:

• The Auditor Got the Facts Wrong: The IRS misinterpreted your bank statements, receipts, or explanations—a frequent issue during correspondence audits.
• Valid Deductions Were Denied: Your legitimate claims for mileage, travel, home office, or other business expenses were rejected.
• The Law Was Misapplied: The examiner lacked the specific technical knowledge required for complex areas.
• Flawed Income Analysis: The IRS used “indirect methods” (like a Bank Deposits Analysis) that do not accurately reflect your actual income.
• You Have Clean Records: You have organized, solid documentation that the original examiner ignored or refused to consider.
• Unfair Penalties: You were hit with accuracy or negligence penalties that are unjustified given the facts.
• Examiner Bias: The audit felt adversarial or biased. Appeals offers a neutral, fresh set of eyes.

What Happens If You Do NOT Appeal?

Failing to respond to an appeal deadline is rarely the right strategic move. If you let the deadline pass, you trigger a chain reaction of enforcement actions:

• Automatic Assessment: The proposed tax becomes a final, legal debt.
• Interest Compounds: Interest starts accruing immediately on the full balance, increasing your total liability daily.
• Aggressive Collection: The IRS can begin enforced collection, which may include liens against your property or levies on your bank accounts and wages.
• Loss of Leverage: You forfeit your right to an administrative appeal, losing the chance to settle without court.
• The “Pay-to-Play” Trap: Once the appeal window closes, you may lose the right to fight the tax without paying it first. You would be forced to pay the full disputed amount before you can sue for a refund in federal court.

What a Tax Attorney Does During IRS Appeals?

Hiring an experienced tax attorney ensures your appeal is handled with legal rigor and strategic negotiation leverage. An attorney transforms the appeals process from a simple factual dispute into a professional legal defense, handling every detail so you never have to speak with the IRS directly.

The representation provided by an attorney is focused on three key areas: Legal Defense, Negotiation Leverage, and Client Protection.

📌 Expert Legal Defense

An attorney establishes a strong, formal legal foundation for your position:

• Drafts the Formal Protest: They prepare a comprehensive, legally sound protest document, complete with all necessary citations, exhibits, statutes, and case law to professionally challenge the IRS examiner’s findings.
• Challenges Improper Findings: They use deep knowledge of statutes, regulations, and relevant court precedents to argue against deductions improperly disallowed or against the incorrect legal standards applied by the examiner (e.g., misclassification issues).

📌Strategic Negotiation & Settlement

The attorney is trained to maximize your chances of settlement.

• Identifies Litigation Hazards: An attorney’s most powerful tool is their ability to identify and argue the “hazards of litigation.” This means demonstrating to the Appeals Officer the significant risk and cost the IRS would face if your case were to go to Tax Court. Appeals officers are specifically trained to factor these hazards into their settlement offers.
• Negotiates Reductions: They leverage the hazards of litigation to successfully negotiate substantial reductions in the tax liability and the associated penalties. Eliminating or reducing penalties is often a major focus area in Appeals.
• Prepares for Tax Court: By preparing the case as though it were heading to trial, the attorney strengthens your negotiation position.

📌Client Protection & Management

• Manages All Communication: The attorney acts as a protective shield, handling all scheduling, correspondence, and settlement discussions. You never have to communicate directly with the Appeals Officer or the IRS.

Protect Yourself Before You Appeal. Contact our firm today for a consultation.

You need immediate legal representation to protect your rights and stop collections before they begin if you have received any of the documents below.

At Pelham PLLC, we act as your protective shield, managing every aspect of the dispute to secure the best possible outcome:

• Draft Protests: We submit legally sound Appeals protests designed for settlement.
• Fight & Reduce Assessments: We aggressively challenge proposed tax liabilities.
• Remove Penalties: We focus on eliminating or significantly reducing assessed penalties.
• Manage All Contact: We handle every communication point—you never speak to the IRS directly.
• Protect Your Rights: We safeguard your dispute from being classified as a criminal matter and protect you from IRS overreach.
• Prepare for Tax Court: We conduct pre-litigation work, strengthening your appeal position.

💡Insight: Don’t respond until you talk to us. You have rights, and we will defend them.

FAQs

How long do I have to appeal an IRS audit?

Usually 30 days, unless it’s a Notice of Deficiency — then 90 days.

Can I appeal after paying the tax?

Yes — but you must request audit reconsideration or file a refund claim.

Can new evidence be submitted to Appeals?

Yes. Appeals considers new arguments and documentation.

Do I need a lawyer to go to Appeals?

Yes. Appeals is a legal negotiation.

What if I miss the 90-day deadline for Tax Court?

You lose your chance to dispute without paying first.