When a taxpayer disagrees with an IRS audit or examination result, the dispute does not necessarily end there. Taxpayers have a right to challenge the proposed adjustments, penalties, or collection actions. The next step is often to take the matter to the IRS Independent Office of Appeals. IRS Appeals is an independent administrative forum designed to resolve tax disputes impartially and without litigation. Understanding the Appeals process can help taxpayers evaluate their options and approach disputes strategically.

What Is the IRS Independent Office of Appeals?

IRS Appeals operates as a separate organization from the IRS’s examination and collections functions. Appeals officers review disputes objectively, focusing on the existing record rather than conducting new audits. The goal is often to reach a compromise, recognizing that both parties may have certain “hazards of litigation.” Appeals is generally the last administrative option before filing in U.S. Tax Court, district court, or the Court of Federal Claims.

When Can a Case Can Go to Appeals?

Taxpayers can seek review by Appeals in various circumstances, including:

• Disagreements with proposed adjustments from an IRS audit
• Certain penalty assessments (e.g., accuracy-related, international reporting, or trust fund recovery penalties)
• Collection actions like liens, levies, or installment agreements
• Other disputes where Appeals jurisdiction applies

The process typically begins when the IRS issues a Notice of Proposed Adjustment or a 30-day letter giving the taxpayer a chance to ask Appeals for review.

If the taxpayer does not pursue Appeals at that stage, the IRS can issue a statutory notice of deficiency. Then, the taxpayer’s primary recourse is filing a petition in the U.S. Tax Court within 90 days of the notice date.

How Does Appeals Evaluate Cases?

Appeals officers generally analyze disputes through the lens of “hazards of litigation.”

This means they consider how the case might be resolved if it were ultimately litigated in court. The officer evaluates factors like:

• Strength of the legal arguments and factual evidence
• Relevant case law, statutes and regulations, and IRS administrative guidance
• Expected success rate for the parties

The Appeals process often provides opportunities to negotiate settlements because focuses on litigation risk rather than just enforcing the IRS’s original position.

What Happens in the Appeals Process?

Once a case is transferred to Appeals, the process typically involves several stages.

1. Case Assignment – An Appeals officer is assigned to review the matter. The officer can ask for more information or clarification about the taxpayer’s position.
2. Appeals Conference – Can occur by telephone, videoconference, or in person. During this conference, the taxpayer or taxpayer’s representative presents arguments challenging relevant audit results.
3. Settlement Discussions – Appeals officers often explore potential settlement options based on their evaluation of the hazards of litigation. In some cases, disputes are resolved entirely at this stage. In others, partial settlements can narrow the issues that continue in dispute.

Strategic Tips for Successful Appeals

Although Appeals is less formal than litigation, preparation remains critical. Effective Appeals advocacy often involves:

• File a well-supported and documented written protest
• Focus on the strongest legal and factual arguments
• Anticipate and address the IRS’s position
• Be realistic in evaluating settlement opportunities

In many cases, the Appeals process is the best opportunity to resolve a dispute without costly and time-consuming litigation.

Appeals vs. Tax Court

If a case can’t be resolved in Appeals, taxpayers can pursue litigation in the U.S. Tax Court, federal district court, or the Court of Federal Claims, depending on the type of dispute.

Using the Appeals process before litigation often provides a valuable opportunity to reassess positions and negotiate potential resolutions.

For many taxpayers, the Appeals process is a practical path to resolving disputes and avoiding extra cost and uncertainty from litigation in court.

Get Help from a Tax Appeals Attorney

Tax disputes can involve complex legal and factual issues. This is particularly true where audits involve multi-year adjustments, significant penalties, or technical tax questions.

Professional representation can help taxpayers:

• Assess the strength or risk of their position
• Prepare persuasive Appeals protests
• Negotiate effectively with Appeals officers
• Decide whether settlement or litigation is the appropriate path

For professional guidance on IRS audit defense and federal tax compliance, connect with DBL Law Partner Nick Eusanio. Nick offers strategic counsel on audit readiness, defense, and proactive tax planning