18. IRS Appeals Office - Can They Help Me? (10/12/23)

Industry Observer with Ocean Consulting Services LLC

So the IRS tells me that I owe them money - can they just start taking my property? Absolutely not - as discussed in previous posts the IRS takes a number of steps before actually seizing property - typically there are a series of notices that are given by the IRS that relate to the tax debt. These steps are taken to avoid running afoul of Constitutional rights against unreasonable seizures of property.

There are a number of ways to contest an assertion made by the IRS. If you disagree with the IRS your first step should be to put your objections in writing and send this to the IRS. If the IRS does not agree with you there is a formal process available to dispute the IRS finding. These disputes are handled by a group named the “Independent Office of Appeals”.

Although this group is a division of the IRS they do operate separately from the IRS exam and collection groups. According to the IRS: “Appeals is separate and independent from the IRS Examination and Collection functions that make tax assessments and initiate collection actions. Our mission is to resolve tax controversies: without litigation, on a basis which is fair and impartial to both the Government and you, and in a manner that will enhance voluntary compliance and your confidence in the integrity and efficiency of the Service.”

Let’s discuss how this Appeals group can be utilized - in the assessment area and with collection actions - by way of a couple of examples.

Say you’ve prepared your tax return, filed it, and made payment due with the return. Your return is then examined by the IRS. They challenge certain deductions you claimed against your income. You disagree with their assertion that you overstated deductions. Notwithstanding your belief that your claimed deductions were appropriate the IRS disagrees with you - they assess additional tax.

At this point you can request that your case be reviewed by Appeals. The request would include a written statement of your disagreement along with any supporting documents. An “Appeals Officer” will be assigned to your case and a hearing date will be scheduled. At the hearing - typically via conference call - you’ll be given the opportunity to make your case. In our experience Appeals Officers are experienced professionals who value their independence from rest of the IRS. They offer a “fresh set of eyes” to your case and have the authority to overrule previous decisions made by other divisions of the IRS.

Tax assessments can also be made without your involvement - i.e. the IRS prepared a return on your behalf (a “substituted return”), the IRS charged you with the “trust fund penalty”, etc. As with our example challenges to these assessments can also be heard by Appeals.

Now let’s discuss an example involving the collection of tax.

You file your tax return that reflects a balance due but do not make payment. As discussed in previous posts the IRS will process the tax return and “assess” the tax - a formal recording of the debt. If the tax amount exceeds payments towards the tax the IRS will notify the taxpayer of the resulting debt. The IRS will issue a number of notices; during this time you may or may not attempt to work out a payment solution.

Let’s assume that no resolution is worked out (or you take no action) and now you receive a document called a “Final Notice and Right to a Hearing” - this notification can be made via various forms: Letter 11 / Letter 1058 / CP-90. All these notices have the same effect - you have 30 days to request that your case be taken up by Appeals - though a process called Collection Due Process (CDP) . Making a timely request (Form 12153) prevents the IRS from taking any collection activities - i.e. liens and levies - it also results in the forwarding of your case to Appeals. If you are not happy with the results of the Appeals process you do have the right to take your case to Tax Court. Note that in order to prevent collection actions you must be in “compliance” - filing tax returns when due, making estimated tax payments (if required), etc.

But what if you miss the 30 day deadline? Within a year of the notice date you can request what is referred to as a CDP Equivalent Hearing. This request will result in your case being sent to Appeals however the IRS can take collection actions and you lose your right to bring the case to Tax Court.

Note that even after requesting CDP you can work with IRS Collections to attempt to work out a deal - perhaps an installment agreement, requesting a compromise of the debt, etc. If a deal can be worked out you can cancel the Appeals hearing. Filing for CDP (within 30 days) allows time to work a deal without the threat of the IRS pursing collection activities.

Another avenue of relief is available anytime enforcement is threatened - i.e. liens and levies. Issues with enforcement actions should first be discussed with an IRS supervisor. If issues cannot be resolved you can request assistance through the Collection Appeal Process (CAP) - by way of Form 9423.

This relief procedure is used when the IRS process not working - something is “broken” in the system, normal procedures are not being followed, etc. Filing for CAP relief will elevate your case to an appeals officer. Note that through the CAP process you can’t request collection alternatives but you can raise issues with respect to a previous alternative request.

Another independent organization within the IRS is the Taxpayer Advocate Service (TAS). The primary objective of this group is to assist taxpayers experiencing financial hardship and dealing with IRS system issues - i.e. a delay of more than 30 days after regular processing time to resolve a tax issue, non-responsiveness to IRS requests, etc. This group “makes things happen” - they get to the appropriate IRS personnel to enable your case to proceed.

TAS maintains offices in each state. A request for assistance is made by filing Form 911. In our experience this group can cut though the red tape of the IRS bureaucracy.

The IRS is a complex governmental agency charged with the difficult task of enforcing the tax laws. They have a reputation (sometimes deserved) of being an inflexible bureaucracy. However, as we’ve highlighted, there are a number of ways to navigate the system - from IRS agent and supervisors to the CDP and CAP formal appeals processes and through the TAS agency. Knowledge, and use, of these options goes a long way towards resolving tax issues.

In our next blog post we’ll discuss Tax Penalties / Abatements.

As always feel free to contact us if you need assistance - click Send Message / Contact The Author

Link to Outline Slides:  Outline

Link to Video:  Video - Appeals