Introduction to IRS Appeals and the U.S. Tax Court (Part 3)
By: Michael J. Tedesco, Esq.
Introduction to IRS Appeals
IRS Appeals is a separate branch of the IRS, whose purpose is to resolve tax controversies between the IRS and taxpayers through an informal, administrative process, fairly and impartially, without litigation. IRS Appeals has substantive experts in many of the same areas as the IRS (i.e. designated personnel who deal only with collection issues, certain personnel experienced in international tax matters, and personnel dealing with challenges to tax assessments). Nearly all types of tax issues can be protested to IRS Appeals at the proper time. These include tax deficiencies, assessment of most penalties, including the significant penalties that can be assessed for non-reporting of foreign assets, and a number of different collection matters.
Challenging an Assessment
A taxpayer can seek to challenge an assessment at IRS Appeals, in two ways. First, when the IRS issues a 30-day letter, a taxpayer can file a protest with the office issuing the 30-day letter. As the name implies, the time to appeal is normally 30 days. However, there can be significant variation in the time to appeal, and in some cases a taxpayer may have as little as 10 days or less to file their appeal. Second, if a taxpayer does not appeal the 30-day letter, they will have an opportunity to be referred to IRS Appeals after they Petition the U.S. Tax Court.
Once at IRS Appeals, a taxpayer has the opportunity to make arguments as to why the assessment made by the IRS is incorrect. Should a taxpayer present new information, IRS Appeals will generally have to refer the matter back to the office making the original proposed assessment to review and make a determination on the new information. The IRS will often need to request statute extensions before Appeals can take a protested case to ensure Appeals has sufficient time to consider the case before the statute expires. It is critical to carefully review the statute extensions and ensure that they are not overly broad.
Challenging a Collection Notice
In addition to challenging assessments at Appeals, and as will be explained in more detail in the final installment of this series, certain collections notices also offer a statutory right to file an appeal. The most important of these notices are the Final Notice of Intent to Levy and Notice of Lien Filing. These notices allow for an appeal to be taken within 30 days of issuance of the notice, and typically include the date by which the appeal can be requested. Appealing within the 30-day time period requires the IRS to hold all collection activities. During this collection hold, a taxpayer can present collection alternatives to the original proposed collection activity, and a collection alternative (i.e. Offer In Compromise, Installment Agreement or Currently Not Collectable status) can be presented to the Appeals Settlement Officer. Once the taxpayer’s presentation has been made to the Settlement Officer, they will issue a Notice of Determination with the final resolution for the case. If that determination is not agreed to by the taxpayer, then the taxpayer has an opportunity to petition the U.S. Tax Court to challenge the findings in the Notice of Determination.
Introduction to The U.S. Tax Court
The U.S. Tax Court is an Article I court – meaning the court is created by statute, not by the U.S. Constitution. As such, its jurisdiction is limited. This differs from courts like the U.S. Supreme Court which is a court of general jurisdiction. While the Tax Court is a federal court in all respects, it does follow relaxed rules of procedure and evidence, making it friendlier to pro se taxpayers challenging an IRS action. While taxpayers can represent themselves in Tax Court, it is advisable for them to seek legal representation since the IRS has its own attorneys (IRS Office of Chief Counsel) who specialize in different areas of tax to represent the government’s interest.
As noted in the other articles in this series, taxpayers can challenge IRS tax assessments as well as certain collection activities in the Tax Court. Once a Statutory Notice of Deficiency is issued, a taxpayer has, in most cases, 90-days to Petition the Tax Court. The Tax Court produces simplified Petition forms for pro se taxpayers seeking to challenge an IRS proposed assessment. The deadline to file the Petition is jurisdictional. This means that the Petition must be filed timely for the Tax Court to have jurisdiction over the matter Petitioned. If the Petition is untimely, the Petition would be dismissed by the court.
In the case of a taxpayer who seeks to challenge an IRS collection action, IRS Appeals will issue a Notice of Determination. This notice explains why IRS Appeals agrees with the proposed collection action to be taken by IRS. Once the Notice of Determination is issued, the taxpayer will have 30-days to Petition the Tax Court. Once before the Tax Court, the taxpayer will have to show that the Notice of Determination was an Abuse of Discretion by the IRS Settlement Officer. The Tax Court will then review the arguments from both sides and can have the matter remanded to IRS Appeals. Upon remand, IRS Appeals would have to give additional consideration to information that was presented to them originally.
The attorneys at Andreozzi Bluestein LLP, have extensive experience handling all aspects of the IRS Appeals process, and frequently practice in the US Tax Court. Should you ever encounter issues related to IRS appeals or the US Tax Court and need legal support, contact the professionals at Andreozzi Bluestein LLP for a no obligation consultation on your matter.
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