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Challenging Audit Findings: Appeals and Litigation - Understanding Your Rights and Options

Audit Representation
Facing an audit from the Internal Revenue Service (IRS) can be a daunting experience. If you’ve recently undergone an IRS audit and disagree with the findings, or if you anticipate a dispute, it’s essential to be aware of your rights and the avenues available for challenging these findings. This guide will walk you through the processes of appeals and litigation when you believe the IRS has made an error in its assessment.

Understanding the Audit Process:

Before delving into appeals and litigation, it’s important to understand the audit process itself. An IRS audit is an official review of your financial information and tax returns to ensure compliance with tax laws. There are various types of audits, including correspondence audits (conducted via mail), office audits (conducted at an IRS office), and field audits (conducted in person at your home or business). Audits can encompass specific areas of your tax return or a comprehensive review of your entire financial situation.

Common Reasons for Challenging Audit Findings:

You may disagree with audit findings for several reasons, including:
  • Errors in Tax Reporting: Mistakes can occur during the audit process, leading to incorrect assessments of tax liabilities.
  • Interpretation of Tax Laws: Disagreements over how specific tax laws or regulations should be interpreted.
  • Income and Deductions: Discrepancies related to income, deductions, or credits claimed on your tax return.
  • Evidence and Documentation: Lack of proper documentation or misunderstanding of the records you provided during the audit.

The Appeals Process:

If you disagree with the results of an IRS audit, the first step in challenging these findings is to file an appeal. This is an administrative process that allows you to present your case to an impartial third party within the IRS.

Key Steps in the Appeals Process:

  • Request an Appeal: To initiate the appeals process, you’ll need to submit a written protest. In this protest, you should clearly state your disagreement with the audit findings and provide supporting documentation.
  • Appeals Officer Assignment: An appeals officer, who was not involved in the original audit, is assigned to your case. This officer will review your protest and supporting documentation.
  • Appeals Conference: Typically, an appeals conference is scheduled, either in person, by phone, or via written communication, during which you can present your case and discuss the issues with the appeals officer.
  • Resolution: After reviewing your case and the evidence presented, the appeals officer will issue a determination. This determination can either uphold the audit findings, partially or wholly in your favor, or propose an alternative resolution.
  • Accept or Continue Legal Action: You have the choice to accept or reject the appeals officer’s determination. If you accept it, the audit is considered closed. If you disagree, you can explore further legal options, including litigation.

The Role of Tax Litigation:

If you and the IRS are unable to reach an agreement through the appeals process, or if you believe the appeals process was not conducted fairly, you may pursue litigation. Tax litigation involves taking your case to court, where a judge will make a final decision.

Key Considerations for Tax Litigation:

  • Choosing the Right Court: Tax cases can be heard in various courts, including the U.S. Tax Court, U.S. District Court, or the Court of Federal Claims. The appropriate court depends on the specifics of your case.
  • Filing a Petition: To initiate litigation, you’ll need to file a petition with the court within a specific timeframe. This petition outlines the issues in dispute, the legal basis for your argument, and the relief you’re seeking.
  • Discovery: Both parties engage in the discovery process, where evidence and information related to the case are exchanged. This can involve requests for documents, depositions, and interrogatories.
  • Trial: If the case proceeds to trial, you’ll present your case and arguments in court. The judge will review the evidence and make a ruling.
  • Appeal Rights: If you disagree with the court’s decision, you may have the option to appeal to a higher court, such as the U.S. Court of Appeals.

Protecting Your Rights:

Challenging audit findings through appeals or litigation can be a complex and time-consuming process. It’s essential to have a clear understanding of your rights and to seek professional assistance, such as a tax attorney or enrolled agent, who can guide you through the process, ensure your rights are protected, and present your case effectively.

Frequently Asked Questions

What is the role of an appeals officer in the appeals process?
An appeals officer is an impartial third party within the IRS who reviews your case, discusses the issues with you, and issues a determination based on their assessment of the facts and the law.
How long do I have to file an appeal after receiving an audit report?
Generally, you have 30 days to file an appeal from the date of the IRS’s written decision or the date of the statutory notice of deficiency.
Can I represent myself in tax litigation, or should I hire an attorney?
While you have the right to represent yourself, tax litigation can be highly complex. It is advisable to seek the assistance of a qualified tax attorney or enrolled agent to ensure your case is effectively presented and your rights are protected.
What happens if I accept the appeals officer's determination?
If you accept the determination, the audit is considered closed, and you should follow the instructions provided for any required actions, such as making payments or adjustments on your tax return.
Can I appeal a court decision in tax litigation?
Yes, in some cases, you can appeal a court decision to a higher court, such as the U.S. Court of Appeals, if you disagree with the judgment rendered by the trial court.
Navigating the process of challenging audit findings can be complex and involves various legal and procedural aspects. Seek professional advice and representation to ensure your rights are protected and that you have the best opportunity to achieve a favorable resolution.

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