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Sometimes IRS audits result in the assessment of additional tax, penalties, and interest. However, you don’t have to accept the IRS’s findings contained in the assessment. If you disagree with the findings and assessment, you can file an appeal to contest the findings and hopefully receive a more favorable ruling. If appealing your audit doesn’t work, you can also go to tax court. While the prospect of going to tax court may sound daunting, the potential savings can be worth the investment.
The Law Office of Jin Kim represents clients in audit appeals against the IRS, FTB, CDTFA, and other tax agencies. To learn more about your case call her office at (916) 299-9913 for a free consultation.
How Can I File An Appeal?
If you disagree with the results of your IRS audit, there’s no need to swallow your pride and reach for your checkbook just yet. Filing an appeal is a remedy that taxpayers can turn to if they are not satisfied with the IRS’s findings. An appeal involves raising the issue to a higher authority in hopes of receiving a more favorable outcome. The IRS Office of Appeals handles tax audit appeals, and if you file an appeal, it should be filed in your local IRS Appeals Office.
What Happens During the Appeal Process?
It’s important to note that when you file an appeal, you aren’t engaging in litigation at this point. In fact, the whole point of the appeal is to avoid a lengthy litigation process for all the parties involved. Thus the process in an appeal may be different from that of state and federal courts. An appeals officer will be assigned to your case and they will take a more active role, acting both as fact finder and arbitrator.
The appeals officer is more empowered to make judgment calls on the issues. Appeals officers strive to close cases on an agreement instead of allowing them to go to court so taxpayers can use that to their advantage. The appeals officer also takes into consideration the so-called “hazards of litigation”. Hazards of litigation simply mean the chance that the court will not side with the IRS’ position if the case goes to court. The higher the hazard, the more eager the IRS will be to come to an agreement with you.
Why Should I File A Case In Tax Court?
So let’s say your appeal doesn’t turn out in your favor. There’s still one option left – going to tax court.
Most taxpayers are intimidated by the idea of going to tax court, and with good reason. Tax law is very complex, and bringing a case in tax court is best done through experienced tax counsel. However, filing an appeal in tax court may be filed pro se as well – that is, filed without the services of a lawyer; but how many of those cases yield successful results?
Settlement Is Possible
Some may think that filing a petition in tax court would incentivize the IRS to settle, but this often means the taxpayer is facing an IRS attorney that sides more with the IRS’s position than the IRS Appeals Officer. However, while the opposing attorney may appear disinclined to settle in the early stages, their stance may change over time. Nevertheless, even if the IRS doesn’t settle, you have a chance of receiving a favorable judgment in tax court with over half of petitions receiving some form of tax relief judgment. Lastly, the filing of a case in tax court delays the collection of your tax bill. So even if the result isn’t ideal, at least you’re buying yourself some time to come up with the money. Note, however, that interest will continue to be applied while the collection is suspended over this period, so don’t try and delay the case.
Don’t expect a full vindication in tax court, however. It’s rare to receive a total reprieve from your liabilities. Your best chance is that you’ll receive a deduction or a compromise for the amount you’re liable.
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