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You may not walk away with a deal from the appeals officer at one sitting. The officer may want more documents from you or to research an issue before rendering a decision or accepting a settlement proposal. And
if you ask, you will usually be given time to confer with a tax pro about our case, send more documents, or do legal research. Request a month to get things in. Appeals officers seem to work at a more leisurely pace than the rest of the IRS, so yours may agree to an even longer time.
The officer may ask you to sign a waiver extending the normal threeyear limit the IRS has for assessing a tax liability. It is usually okay to agree to an extension at the appeals level—but often not during the audit. When you and the appeals officer reach a settlement, the appeals officer does the paperwork. You won’t be asked to write anything except your name.
Settlements are formalized on IRS Form 870,Consent to Proposed Tax Adjustment.
Don’t expect the settlement papers right away; the IRS may take several months before finalizing the papers. Settlements must be approved by a supervisor before leaving the IRS office.
Review your notes from the hearing. If the settlement papers don’t match, call the officer and hash it out. If you still have questions, run it by a tax pro, who can check computations and explain the details to you. Once you
sign, you are barred from going to tax court if you change your mind.
Appeals settlement figures may not include the government-mandated interest. Ask the appeals officer to figure this in to get the bottom line cost. Otherwise, the final bill may come as a shock.
If you and the appeals officer can’t reach a settlement at the end of your meeting, maybe further convincing is needed. Keep trying. Ask what else you can do to change the officer’s mind. Maybe he or she needs further documentation or supporting legal precedent. If so, request time to submit it before the decision is final. If in doubt how to follow through, see a tax pro.
If you never settle, you’ll get a letter denying your appeal. It will come with a form called a 90-day letter, or notice of deficiency, advising you of your right to go to tax court. If you don’t act, after 90 days the audit
report becomes final. The tax is assessed and a tax bill from the IRS Service Center will arrive within a few months.
In a few situations, the Internal Revenue Manual restricts appeals settlements. If the appeals officer mentions any of the following, you are limited in negotiating with appeals officers or may have to go to tax court:
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