PART I I – APPEALS
This article is the second in a three-part series dealing with
“Rules” of taxpayer representation. Part I focused on the Audit,
Part II focuses on Appeals. Taxpayers have certain appeal rights
after an audit and during the collections process. Appeals during
the collections process will be discussed in Part III. At the
conclusion of the audit, the auditor issues a Notice of Proposed
Adjustment, or 30-day letter as it is more commonly called,
because as the name suggests, the taxpayer has 30 days to file a
Protest (Appeal). If the taxpayer fails to file a Protest, the IRS
issues a statutory notice of deficiency or 90-day letter, again
because the taxpayer has 90 days to file a Petition in the U.S.
Tax Court. If the taxpayer files a Petition in the Tax Court, the
case will in most situations be referred to appeals for a hearing.
Although the appeal hearing is informal in nature, it is similar
to a legal proceeding, and a taxpayer’s representative should be
experienced in handling appeals.
- 30-Day Letter or 90-Day Letter Appeal. An appeal from the
30-day letter and 90-day letter end up in the same place for
a hearing, the Office of Appeals. An appeal from the 30-day
letter requires the taxpayer to extend the statute of limitations
on assessment. As discussed in Part I, extending the statute
should be carefully considered, as this allows new issues to be
developed. The hearing officer could decide to send the case
back to the auditor if some issues are not fully developed. This
could also result in new issues being developed. Once the
IRS issues a 90-day letter, the IRS is generally precluded from
opening new issues. This is an advantage of filing a Petition in
Tax Court from the 90-day letter. The case will then be sent to
appeals for a hearing. - Request Account Transcripts. The starting point for any
taxpayer representation, whether the situation is an audit,
appeal, penalty abatement, or collections, is to request the
taxpayer’s account transcripts for the relevant tax and periods.
The account transcript contains a history of any activity that
has occurred on the taxpayer’s account. You can determine
when the tax return was filed, taxes paid, penalties assessed,
and other activity. - Request the Taxpayer’s Audit File. Always request the
taxpayer’s audit file. If I have been retained during the middle
of the audit, I usually request the file from the agent. If the
agent is unwilling to provide the file, I tell them that the
audit cannot continue until I receive it and have reviewed
it. If the agent refuses to provide it, I file a formal Freedom
of Information Act (“FOIA”) request. If I am handling the
appeal, my first step is to file a FOIA request for the audit
file. The audit file contains the agent’s daily activity log, work
papers, notes, and a host of other information that may be
beneficial to your client’s case. The audit file often contains
information that you can use to your client’s advantage at the
appeal hearing. - Face-to-Face Meeting. I initially request a face-to-face
meeting at the local IRS appeals office. This is done when I
receive the first IRS correspondence after the case has been
assigned to appeals or as part of the Protest. I can always
change the hearing to a telephone conference at a later date.
In my experience, better results are achieved at a face-to-face
hearing. You can personalize the taxpayer, and have a better
discussion of the issues in a face-to-face hearing.
Taxpayer representation is more art than science. It takes
practice and experience to obtain a feel for the different steps
in the process.
These are some of the general rules I follow, but I am always
ready to adapt based on the circumstances of each particular
case. Rules of taxpayer representation during the Collection
process follow in Part III.
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