Challenging an IRS Business Tax Audit

It is important to understand that the IRS agent’s report is non-binding, which means that it is not final and you can challenge the findings by filing an appeal.  If you do not already have legal representation, it is imperative that you seek the advice of a tax attorney as soon as possible. Obtaining legal counsel will ensure that the correct documents are filed on time and the likelihood of your appeal being successful will be greater.

Appeals process

There are three levels of appeals that you can file before exhausting your options.

First, if you are dissatisfied with the agent’s report, ask to speak with the agent’s manager. Appealing the agent’s report to the agent’s manager is particularly useful in situations where the agent acted in an unprofessional manner or if you believe the agent failed to give proper consideration to additional evidence you provided during the audit. The agent’s manager will meet with you and personally review the audit report along with any additional information provided to reach a conclusion.

Second, if the manager’s conclusion is similar to the agent’s findings, but you still disagree with the audit report, the next option is to file an appeal with an IRS appeals officer. An appeals officer is specially trained to handle audit appeals and will specifically review your arguments against finding of the initial audit report. To increase the likelihood that an appeals officer will agree with your basis for challenging the audit results, make sure to include all of the necessary documentation to back up your claims in your appeals packet. Be sure to provide an outline that lays out your arguments in a clear and concise way.

Third, even after the second level of appeal, you still disagree with all or some of the findings, the final level of appeal rests with the United States Tax Court. Navigating an appeal to the tax court is complicated; there are several technical rules, deadlines, and format requirements. For example, if you miss a response filing deadline with the tax court, your case could be dismissed causing you to pay all of the disputed taxes.

It is best to contact a tax attorney who can handle the appeal completely on your behalf. Those taxpayers who retain attorneys for their appeals are usually more successful than those who attempt to file appeals on their own.