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How IRS Appeals Work

Section 8631 of the Internal Revenue Manual states:

“The appeals mission is to resolve tax controversies, without litigation, on a basis which is fair and impartial to the both the government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the [IRS].”

The keywords are: “to resolve tax controversies, without litigation …”

The appeals office exists to settle cases with taxpayers

You might think that the work of an appeals officer is to raise money for the U.S. Treasury, but that’s a different job.

The IRS appeals office is completely separate and independent from the district office that handled your audit. It might even not be in the same city or building. Appeals officers view cases from a fresh perspective. While a few officers rely heavily on the auditor’s file, most keep an open mind to your proposals.

The auditor doesn’t participate in the appeal. His or her file is before the appeals officer, but it may lack important details. An appeals officer might contact your auditor to clarify something, but chances are the auditor may have moved on or have long forgotten your case. Many months will have elapsed since the auditor saw that file. If you submit new data to the appeals officer, the officer might ask the auditor to review it, but it’s doubtful.

What can you expect from the IRS appeals officer?

Appeals officers are experienced negotiators. IRS appeals officers are longtime IRS employees. Most have come up from the ranks of auditors to these more prestigious and higher-paying jobs.

Appeals officers are trained to be flexible. They are given more discretion in dealing with taxpayers than auditors have. IRS statistics show that 70% of appeals are settled. Appeals officers’ job performance is judged in how many compromises they reach—not how often they uphold IRS auditors.

Appeals officers are aware of legal precedents on routine tax issues. They can rattle off things such as the kinds of documentation legally sufficient to verify business entertainment expenses or a home office deduction.

Unless your case is very unusual, the appeals officer will have already researched the applicable legal issues in your case.

Appeals officers can weigh the “hazards of litigation.” They often settle cases because the IRS does not want the courts to set any precedents unfavorable to the IRS. Court decisions against the IRS are published and can be relied on by other taxpayers. Bad precedent would cost the government much more in the long run than settling your case at the appeals level would cost.

Appeals officers are realists. They know that about 50% of all taxpayers win at least partial victories in court. Therefore, the appeals officer is alert to any fact that might cause a judge to rule in your favor. In addition, the appeals officer understands that the IRS’s workforce is not unlimited. Most Congressional funding to the IRS in the last decade has gone into computerization and hiring collectors—not hiring appeals officers or legal staffs.

They don’t want small-potatoes cases using up more of the government’s resources than is absolutely necessary.

CAUTION:

An appeals officer can’t settle a case based purely on its nuisance value. The officer won’t cave in just to avoid the trouble of going to court. You must supply a justification for the appeals officer to make a deal.

The officer’s work is reviewed by higher-ups, so he or she must include good arguments in your favor in the report.

Do you need help dealing with the IRS? Reach out to us for a free 15-minute consultation with one of our tax attorneys. We represent clients nationwide have been helping clients stand up to the IRS for over 40 years.