The IRS Appeals Process

Table of Contents

Abstract

When a taxpayer is under the action of IRS collection, and he fails to pay for the tax, or even does not make a plan for repaying taxes within the expected time, the persons become a subject to IRS levy. The IRS process makes use of the levy process to seize investment accounts, real estate, bank accounts, and personal property and to seize wages. For one to become a subject to the levy process, he or she should be first be notified by the IRS.

The taxpayer will still have the opportunity to make dispute on the levy’s validity and avoid having to be forced the collection. Though it is possible to file lawsuits against the IRS, there are only few such cases because in most cases, using the IRS is not the only option to avoid any forceful tax collection. Contesting levies have numerous and less restrictive options that are available through the process of administrative appeals of the IRS. This paper will critically examine the IRS appeals process.

IRS appeals process

The main mission of IRS is to provide the America’s taxpayers with high quality service through helping them to meet and understand their responsibility to pay taxes. The IRS mission is also to apply tax laws through fairness and integrity. On issues of tax, practitioners and clients working on behalf of the clients may disagree with the Internal Revenue Service. The IRS has in place the appeals system to handles any form of disagreements that may arise. The appeals system enables the settling of differences without the need to take time and expenditure in courts. The actual reasons for the disagreements do vary considerably based on the circumstances and facts leading to disputes.

Despite of these differences, the IRS will only look at the cases under disputes that arise from the tax law scope. Therefore, the processes of appeals do not look into cases, which individuals need appeals on Constitutional and moral basis grounds. Furthermore, taxpayers have the option of presenting their cases to the tax court directly without having to use the IRS system of appeals to settle disputes. Since there is a high cost and too much time needed in this deliberative process, yet it is an optional procedure, its benefits may not justifiable based on the benefit/cost standpoint. There is, however, the need to understand the appeals process of the IRS.

Current developments within the IRS process

The modern day appeals process of the IRS, based on the new IRS programs, and the new direction given to the IRS compliance section have generally, been to the taxpayer’s advantage. These new trends also involve IRS trends and polices. The taxpayer’s option to make use of the IRS appeals is an affordable and easy option to their pockets. The examiners decisions on tax can be appealed through the local appeals office without any interruption from the IRS office, which initially was concerned with the examination. Within the IRS, the only available option of appeals is through the appeals office. The personnel for the appeals office have to carry out conferences personally via, telephonically and correspondence with the authorized representatives of the taxpayers or the taxpayers themselves (Rack & Olansen 2012).

The taxpayers will be expected to present letters concerning their tax disputes or on the proposed instructions for tax adjustments will be seen to the appeals officer also requesting them for a conference. Many factors do determine the formal written protests and small cases request filed by individuals. For example, when a taxpayer has requested for a conference, the examiner will first be required to send the request letter for a conference to the office of appeals so that its arranges and plans for the conference as a convenient place and time. After the letter is sent, the taxpayers or their designated representatives will then prepares to present their issues under dispute at the time and place. Most differences within the IRS appeals processes are settled on these conferences (Rack & Olansen 2012).

The qualified people to represent taxpayers are certified public accountants, the attorneys or agents allowed or enrolled to conduct this service. Their role is to represent their clients in the IRS appeal process. The conference may also be attended by a witness, but he or she cannot take up the representative role. When a taxpayer has requested for a conference, a formal letter should be written to the appeals office within thirty days after being notified to be under the levy. The IRS can, however, decide to extend the deadline. The conference is a formal session that can be done through the telephone or in person.

The role of the Appeals Officer will be to evaluate the litigation hazards in all areas and has the responsibility and authority to settle any brought case. When an agreement is not reached with the Appeals officer, the taxpayers or his representative can forward the case to the Tax Court of the United States. Those issues, which the taxpayer feels that were not effectively dealt with by the Appeals officer can be forwarded to the Tax Court. These issues can also be handled by the United States District Courts or the United States Court of Federal Claims, when all the jurisdictional and procedural requirements are satisfied (Rack & Olansen 2012).

Generally, the internal process of Revenue Service Appeals for settling tax disputes with the IRS is less expensive and a faster method compared to using the Tax Court. It is necessary for the taxpayer to have a qualified representative or a tax lawyer whenever he or she faces complicated issues or when the taxpayer feels that he cannot effectively handle the case alone.

Appeals options

There are three main options of for appeal. They as follows;

Collection Due Process (CDP). The Collection Due process is an administrative appeal program is available in settling levy cases. When the taxpayer has received a notice letter on levy intent, yet it has not been executed, he or she can take the CDP option. A notification normally accompanies the written intent to levy notice, on the right of the taxpayer to a hearing before the levy. The taxpayer can request for a timely CDP hearing. Where the IRS office of Appeal employee or officer will carry out the hearing. The officer should not be one who had previously handled tax issues facing the taxpayer concerned or the current issue to be dealt with on unpaid tax. The CDP hearing is an informal occasion but does not require face to face or in person meeting. The taxpayer can, however, request a one to one meeting to raise relevant issues.
Collection Appeals Program (CAP) the option of Collection Appeals Program is a way that a taxpayer can appeal a levy against the IRS. With the CAP, the taxpayer can make appeals on seizures, levies, liens and proposed terminations or denials on installment agreements. When the taxpayer appealed his case through the CAP, IRS, will withhold the action of tax collecting up to when the case has been settled or when there is enough reason to justify that the collection of tax is under jeopardy. When the decision has been reached on the CAP case, this decision will be binding, and it is final to both IRS and the taxpayer.
Hardship Appeal through an advocate. The third method for appeal administration for a proposed levy is via the office of the taxpayer’s advocate this is after an application is sent to the Taxpayer Advocate or one of is his designee. After this application has been filed, the taxpayer advocate will issue the Taxpayer Assistance Order (TAO). The TAO is written after the advocate has examined the hardship or suffering that the taxpayer is facing or about to face based on the method of administering tax laws by the IRS. The forms of relief expected from this action can be the suspension of the actions of collecting tax and levy release (Rack & Olansen 2012).

The pros and cons of the appeal methods

The taxpayer has to consider various procedural aspects in determining the suitable method to uses for administrative appeals. These methods have differences especially on the basis of the right for review. For instance, when the taxpayer decides to appeal through the determination of the CDP in the tax court, there will not be the right for judicial review when the TAO or CAP processes are used. For the case of CDP, its main disadvantage is that the taxpayer has to request for hearing or conference within a period of thirty days after the date that he received a notice for his hearing right. The time limit cannot be waivered.

However, there is a consideration when the submitted written request is done within the 30 days period, but, its content requirements are not satisfactory. The time can be added when the request is done correctly within a reasonable duration. In case of a late request for a CDP hearing by the taxpayer, the IRS will present him or her with a chance of CDP hearing, which is an equivalent hearing. However, the equivalent hearing does not have the judicial review for determining the hearing and cannot suspend the action of collection passed against the taxpayer. Both CAP and TAO, on the contrary, are not under the time limit specifications for one to appeals the levy notice. The appeals methods are available after and before the imposition of a levy on the property. Generally, both CAP and TAO are much quicker methods of appeals compared to CDP.

The three administrative appeals processes also have differing issues that need consideration. Within the CDP process, the taxpayer has the power to context on the tax liability underlying issues when some conditions are not considered. This kind of contest is not possible when using the TAO or CAP approaches. The CDP process, on the other hand, is not to be used among the people holding property on behalf of the owner of property or for chosen nominees of the taxpayer. These persons can choose to use either CAP or TAO. Another distinction comes in the area of penalties associated with Trust fund recoveries. The IRS in particular does not consider such recoveries but offers in penalty abatement or compromise appeals under the procedures of CAP.

It is necessary to consider the penalty’s frivolous appeal, in that an amount of $5,000 can be imposed as a penalty by IRS to individuals who have submitted an application for a TAO or CDP requests. Fast track mediation process is also another channel offered by IRS in resolving a wide range of issues that may result from, compromise of offers, audits and examinations, penalties from the trust fund recoveries and from others actions of collection. The cases presented to fast track mediation are mainly issues, which cannot be docketed in any court. The mediation processes of such cases may occur under the request of a taxpayer to hold a conference with the supervisors. The process does involve an Appeals Officer with the qualification of mediation. Either the taxpayer representative or the taxpayer will be involved in this session.

Small case requests

In case the total amount of tax duration is less than $25, 000, the taxpayer is provided with a chance to file a request for the small case instead of using the formal conference request (Rack & Olansen 2012). The total amount is arrived at by calculating the proposed decrease or increased of the claimed fund or tax, as well as, penalties. The tax case request the taxpayer is expected to follow the letter instructions. Other considerations to be followed involve the following;

Suspension of penalties and interest: IRS has about three years since the date that the taxpayer agreed to file for tax return or when the return date is due for the additional tax to be assessed. The taxpayer can, however, file for a timely tax return or extensions, and this will mean that certain penalties or interests will be suspended. This happens when IRS does not send the taxpayer with a notice informing him or her on liability and its basis within a period of 18 months starting after the due date of tax return, or after the taxpayer filed for the tax return. The taxpayer also has the power to stop the recurring of taxes. This is through sending cash to IRS that will cover part or the entire amount owed by the taxpayer or his representative. This will stop the recurring of interest in whole or part of what the taxpayer owes.

Post Appeal

After requesting for an appeal, a qualified offer can be achieved; in that the taxpayer is offered reasonable fees and costs. The taxpayer is considered as the prevailing party in the civil proceeding or action. This happens when the taxpayer has made a qualified offer for settling the case with IRS, when the offer is not accepted by IRS, or when the court has determined the tax liability to be less, or equal to the qualified offer amount. The burden of proof is also considered when the taxpayer has presented credible evidence concerning the issue under dispute. The taxpayer at the end of the appeal process can also receive interest abatement based on the delay or errors of IRS. When a solution is not reached, the taxpayer can consider petitioning the case in court.

Conclusion

This paper has shown the general process involved in IRS appeals process. The three methods of appeals methods have been presented which is Hardship Appeal through an advocate, Collection Appeals Program (CAP) and Collection Due Process (CDP). The advantages and disadvantages of these methods are discussed, showing the aspect and features of each one of them that have to be considered by the taxpayer or his or her representative in selecting one.

The appeals that a taxpayer feel that they are not satisfactory can be forwarded to the Tax Court or the District courts of the United States. However, The IRS appeals process is much cheaper and fast compared to disputes solved in courts. This paper will benefit all taxpayers in understanding the process and the right method to choose whenever they have to solve disputes against IRS.

Reference

Rack & Olansen (2012) Administrative Appeals Process. IRS levy. Professional Law Corporation.

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