After undergoing an IRS tax audit and the IRS auditors make a due taxes, interests, and penalties claim based on the audit, most taxpayers go ahead and pay the taxes claimed or set up an installment plan to have these due taxes paid off. IRS statistics show that only one in every ten taxpayers who are audited ever file an audit appeal. However, anyone who has undergone an audit is better placed if he or she files an appeal. Filing an IRS appeal is every taxpayer’s right and the process is simple and does not cost anything. Furthermore, statistics show that filing an appeal increases your chances of reducing the determined tax dues in an audit by a big margin. According to IRS statistics, on average, those who appeal an audit get a tax due reduction of about 40%. Therefore, if you have undergone an IRS audit and have been served with a tax invoice from the audit findings, your next step should be that of filing an appeal.
How to Appeal
In order to successfully appeal an IRS audit, you will need to file such an appeal within 30 days of receiving an audit report. If you are not ready within this 30 day period, you can seek a further 60 day extension. The process of filing an appeal depends on the due taxes arising from the audit. For those whose tax bill is below $2,500, they should write to the auditor who handled the audit for the appeal. If the amount due is above $2,500 and below $25,000, one should either write to the IRS with information and documentation to support the appeal or file Form 12203, “Request for Appeals Review Form”. For those whose bill is above $25,000, they are required to file the Form 12203.
The Appeals Department
The IRS has set aside a department that handles all IRS audit appeals. The IRS Office of Appeals has a team of over 2,000 employees who review and consider all appeals filed by audited taxpayers. Since the appeals team is different from the audit team, the IRS appeal staff will review the audited work with an impartial perspective and hopefully, with a more lenient approach. Since an appeal has potential for litigation, which is a more involving process for the IRS, the appeal staff usually reviews the audited returns with an intention of avoiding such litigations. Instead, the appeal officer’s intention is to get to a consensus with the disgruntled taxpayer. For this reason, audits will in most cases, result in lower tax dues.
When Not to Appeal
At times, an appeal audit may result in a higher tax bill if there were items that were not caught under the first audit. However, the chance of this happening is very low, as the appeal auditors will concern themselves more with the contended issues. However, if you are aware of specific items that were not audited and that have a potential of increasing your tax bill, it is best not to appeal, as the appeal may raise these unaddressed issues.