While taxpayers can fight to protect themselves during an IRS audit, often the auditor hands down a decision that is unfair or not based on the facts. This does not mean the taxpayer is automatically stuck paying a large tax bill he or she should not owe.
The IRS gives taxpayers the chance to appeal its auditors’ decisions, first to the auditor’s supervisor, then to the agency’s local Appeals Office. The Appeals Office is a separate, independent entity from the IRS Office that performed the original action. Another option is to skip the Appeals Office and take the case to federal court.
By appealing to the Appeals Office, you enter into a conference. Most of the time, you must file a formal written protest to initiate the appeal. However, cases involving less than $25,000 may qualify for a small case request, a less formal document.
Otherwise, the written protest must contain several pieces of information, including the years or tax periods in question; the changes the taxpayer does not agree with; the facts supporting the protest; and the law or authority the taxpayer is relying upon.
For someone inexperienced with appealing IRS audits, avoiding mistakes can be daunting. Fortunately, the IRS allows taxpayers to have a representative prepare the protest on their behalf. The attorney can also represent the taxpayer at the appeals conference. In fact, the taxpayer need not be present at all, if he or she provides the IRS with a properly completed power of attorney form, in order to protect the taxpayer’s confidential information.