Understanding Your Options for Challenging IRS Actions

Dealing with the Internal Revenue Service (IRS) can feel overwhelming, especially when you disagree with a decision. Taxpayers have strong appeal rights, and the law gives you several ways to challenge tax assessments, stop collection actions, and take your case all the way to tax court if needed. Understanding these rights is often the first step in resolving a tax problem and avoiding unnecessary stress.

This article explores your legal rights to challenge IRS audit findings and other decisions. It will also walk you through the major steps of the IRS appeals process, from informal negotiations to petitions in U.S. tax court. We’ll also cover important types of appeals and answer some commonly asked questions.

Whether you’re dealing with an audit, collection threat, or another tax issue, there’s a good chance you don’t have to accept the first IRS decision lying down. You’ll likely have multiple options for fighting back. Consider speaking with a tax attorney sooner rather than later so they can help you understand the issues and the time-sensitive processes involved.

In the meantime, let’s begin with some of the most common IRS decision challenges.

Challenging an Audit or Examination

When the IRS finishes an audit or an IRS examination of your tax return, it may send you a 30‑day letter. This IRS notice explains the proposed changes to your tax return, including any increase in tax liability, penalties, or interest. It also gives you a 30-day deadline to challenge the findings.

A 30‑day letter is the IRS’s formal notice giving you the chance to challenge audit or examination findings by filing an appeal before the proposed changes become final. It’s not a bill, but if you ignore it, the IRS will issue a Notice of Deficiency. This is much more serious, which we’ll get into later in this article.

The 30‑day letter is your first and most important opportunity to push back. You can take this opportunity to file a formal written protest or a small case request.

Formal Written Protests

To challenge the proposed changes or findings, you may send the IRS a formal written protest. This document is your request to have your case transferred to the IRS Independent Office of Appeals, which is separate from the audit division. Appeals officers are charged with settling tax disputes fairly and independently.

A formal written protest must include:

• Your name, address, and telephone number
• A written statement that you want to appeal the IRS findings
• Identification of the 30‑day letter (copy, date, or letter number)
• The tax periods involved
• A list of the tax issues you’re challenging
• A detailed statement of facts supporting your position
• A detailed explanation of the law or IRS rules supporting your position
• A point‑by‑point explanation of why you disagree with the IRS
• A penalties-of-perjury declaration
• Your signature (or your representative’s with power of attorney)

If your case is small (generally under $25,000), you may qualify for a small-case request, a simpler way to challenge a decision.

Small Case Requests

This alternative to a formal written protest is another way to appeal an IRS finding. Small-case requests are available only when the amount in dispute is $25,000 or less (per tax period and per contested item).

Like formal protests, small case requests must be in writing. If you draft your own letter, it must include:

• Your name, address, and telephone number
• A statement that you want to appeal
• The tax periods involved
• A list of the tax issues you’re challenging
• A brief explanation of why you disagree
• Your signature (or your representative’s)

You may also use IRS Form 12203 instead of a letter for a small case request.

Regardless of how you challenge the decision, this is the first crucial legal move in the appeals process.

After the Appeal Request

After you send your protest/request as directed in the 30-day letter, it gets routed to the appeals office. The office then assigns an IRS appeals officer, usually within weeks of receiving the protest/request. This officer’s job is to review the matter and try to resolve the dispute without going to court.

Within 30-45 days of the assignment, the appeals officer sends you an initial contact letter to schedule an appeals conference. The proposed conference may be in person, by phone/video conference, or by mail.

The Appeals Conference

During this conference, you’ll discuss the matter informally with the officer, answering their questions and explaining your position. It’s invaluable if you (or your attorney) have a strong handle on tax rules and your rights at this stage.

The officer won’t usually decide your case during the meeting itself. Instead, they’ll let you know the outcome after they finish reviewing the facts, documents, and arguments. This may take a few weeks to a few months, depending on the complexity of the issues involved.

They’ll send you (or your representative) a closing letter if the case is resolved. If not, it will issue you a Notice of Deficiency if the IRS plans to move forward with assessing the tax. The IRS can only issue this document in exam-related cases. This refers to audits and other matters where the IRS is proposing additional tax.

A Notice of Deficiency gives you the right to appeal to the Tax Court before the IRS can assess the additional tax.

What if You Do Nothing?

If you don’t respond to a 30‑day letter, the IRS will issue a Notice of Deficiency. You will then have 90 days to petition the tax court, which we’ll explain in detail later in this article.

After this notice, the IRS can’t assess the additional tax until either the 90-day period expires or the tax court enters a final decision. If you do nothing, the IRS can finalize the tax assessment after 90 days. This means the amount becomes officially owed, and penalties and interest start to accumulate.

The IRS will then start sending regular bills, giving the taxpayer a chance to pay. If the taxpayer does nothing, the IRS classifies the account as delinquent and moves the case into collections.

During collections, the IRS sends a series of increasingly urgent balance‑due notices over several weeks to a few months. If there’s been no payment or communication, the IRS may escalate the case by issuing a Notice of Intent to File a Federal Tax Lien. When it’s ready to pursue enforcement action, the IRS will issue a Final Notice of Intent to Levy.

It’s not great to get to this point, but not all is lost. Both of these notices give you one of your most important taxpayer rights, the right to request a Collection Due Process (CDP) hearing.

Requesting a CDP Hearing

The right to request a CDP hearing allows taxpayers to legally stop IRS collection efforts. To request a CDP hearing, you must complete Form 12153 and submit it within 30 days of the triggering notice.

Once you do, you’re guaranteed a CDP hearing with the IRS Independent Office of Appeals. In addition, the following will happen:

• All IRS levy actions must stop while the appeals office reviews the case
• The IRS cannot issue new levies during the CDP process
• Your case is transferred from collections to appeals, pausing collection pressure
• You preserve your right to go to Tax Court if you disagree with the appeals decision

Many taxpayers in this situation hire an attorney to ensure the request is filed correctly and on time. You may also request an equivalent hearing if you miss the 30‑day deadline, but it doesn’t stop levy action or preserve your right to go to Tax Court.

Depending on the appeals office caseload and schedule, CDP hearings take place between several weeks to a few months after you file Form 12153. The process and timeline for assigning an appeals officer and scheduling the hearing are essentially the same as when you file an appeal request. Regardless of how long it takes, the levy protection remains in place through the end of the CDP process.

The CDP Hearing

At a CDP hearing, the assigned appeals officer reviews the proposed collection action and listens to your arguments or alternatives for resolving the tax debt. It is critical that you (or your attorney) present your case clearly, protect your rights, and try to secure the best possible outcome.

During the hearing, you may be able to challenge whether:

• The IRS followed proper tax law procedures
• The tax assessments are correct
• The collection action is too harsh
• You’re responsible for the debt as an innocent spouse.

The innocent spouse relief program can shield someone from tax debt caused by their spouse’s or ex‑spouse’s mistakes on a joint return.

The hearing provides you with an opportunity to negotiate an installment agreement, payment plan, or offer in compromise (OIC). An OIC is a formal request for the IRS to settle your tax debt for less than the full amount you owe. The appeals officer is required to consider any reasonable collection alternative you propose.

Regardless of whether you reached an agreement during the hearing, the outcome isn’t considered official until the officer issues a Notice of Determination. This usually takes a few weeks to a few months after the CDP hearing.

If, for whatever reason, you disagree with this notice, there’s still generally one final appeal available to you.

The Final Stand: Petitioning the U.S. Tax Court

A Notice of Deficiency and a Notice of Determination from the CDP process both give you the right to appeal to tax court. You have 90 days (150 for foreign taxpayers) to file your petition for Notices of Deficiency and 30 days for Notices of Determination.

These deadlines are strict and may not be extended. If you miss yours, the IRS can assess the tax and move forward with collections.

Filing a tax court petition stops either the tax assessment or the enforced collection action (depending on the type of case). It also:

• Moves the dispute to a formal court case
• May facilitate negotiations with IRS attorneys
• Often leads to a settlement before trial
• Gives you access to judicial review

Judicial review refers to a tax court judge’s independent review of the facts to determine whether the IRS’s actions and final decision were proper under the law. Many tax court cases settle before trial during negotiations with IRS counsel.

Other IRS Tax Appeals

Not all IRS appeals involve audits or collections. You can challenge most IRS decisions that affect you through the appeals process.

As the agency’s main forum for taxpayer disputes, the IRS Independent Office of Appeals uses the same basic conference and appeals review format for almost every kind of tax dispute. You meet (by phone, video, or in person) with an officer who independently reviews the case and tries to resolve it without going to court.

There are two types of appeals available: OIC appeals and trust fund recovery penalty (TFRP) appeals. Let’s examine each one.

OIC Appeals

If the IRS rejects your offer in compromise, you have 30 days from the date of the rejection letter to request an OIC appeal. This allows you to argue that the IRS made a mistake in judging your finances or didn’t follow its own rules.

To appeal, you’ll file Form 13711 and explain why the IRS should reconsider your offer. You can include new documents that show your income, expenses, or special circumstances. A tax attorney can be invaluable here, as they tend to be skilled at spotting mistakes in the rejection and presenting your financial situation in the strongest possible way.

The appeals officer reviews everything and decides whether the IRS should accept, adjust, or stand by the original rejection. This decision is final unless the OIC was part of a CDP hearing. If so, the rejection becomes part of the CDP determination, which may be appealed to the Tax Court.

Trust Fund Recovery Penalty Appeals

A TFRP appeal is used when the IRS says a business owner or employee is personally responsible for unpaid payroll trust‑fund taxes. These are taxes taken from employees’ paychecks but not sent to the government. If an IRS revenue officer proposes this penalty, they’ll use Letter 1153 (also called a Letter of Proposed Assessment).

You can challenge it within 60 days (75 if abroad) by filing the same type of formal written protest used for audits. The appeal office doesn’t generally accept small case requests for this purpose, even if the amount is less than $25,000.

If the IRS tries to collect the penalty before your protest is resolved, you can also use the Collection Appeals Program (CAP). This is an IRS process that lets taxpayers make a speedy collection appeal request to challenge certain collection actions like liens, levies, and seizures, while a dispute is in review.

CAP doesn’t allow you to go to Tax Court. This is because the officer’s decision is final unless the penalty was part of a CDP hearing.

Get a Professional Opinion

Challenging an IRS decision may feel intimidating, but you don’t have to go it alone. At a minimum, consult a tax attorney who can help you understand your options. This is a highly technical and specialized area. While the law provides you with numerous avenues to fight back and protect yourself, these rights can be difficult for the layperson to assert.

People seek help from certified public accountants, enrolled agents, and other tax professionals to complete forms and for other tax matters. If you’re looking to challenge an IRS determination, an attorney who combines tax-law expertise with the ability to make compelling arguments is often the winning formula.

Finding one you can trust isn’t always easy. For this reason, FindLaw has made its dedicated directory of qualified tax attorneys publicly accessible. This is a solid place to start. Once you select your location, you’ll be able to review credentials and ratings for experts in your area.

Take a look at their backgrounds. Pick one with experience in cases like yours and a record of success challenging the IRS. Arrange a consultation so they can help you understand the full range of options available to you. That way, you can determine the best way to proceed and move forward with confidence.