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How To Survive A Tax Audit

What To Do If You Disagree With The Results Of A Tax Audit

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You do not have to accept an audit report.  Appealing is simple and costs nothing unless you use a tax professional.

  • It is worth noting that about half of those taxpayers who challenge their audit report receive at least a partial deduction in fees.
  • On the other hand, interest will continue to accrue on the amount you are claimed to owe. It is also possible that the appeal officer will raise additional issues which could cost you more money.

Even though appealing is not complicated, you should still think about whether the additional time and stress required is worth the potential reduction in taxes, especially if you are very busy or not feeling well.

Appeals And Tax Court

If you do decide to appeal the results of an audit, the first thing you can do is to request an informal review of your audit with the auditor's supervisor. This can be an immediate meeting if your audit takes place in an IRS office or a teleconference. It may be possible to make some sort of compromise with the supervisor, who will prefer your appeal not go any farther.

If you are unable to reach an agreement with the examiner or the examiner's supervisor, your case will automatically be forwarded to the IRS appeals office for processing. Within 30 days you'll receive a letter notifying you of your right to appeal and give you instructions on how to do so.

IRS Publication #5, Your Appeal Rights and How to Prepare a Protest if You Don't Agree can help guide you through the process. Download it at www.irs.gov/pub/irs-pdf/p5.pdf offsite link.

If your appeal fails, you can still file a petition in tax court.

If the audit bill is less than $50,000 for any one year â€" the total bill could be higher if multiple years are involved -- you'll be able to go to tax small claims court, where it only costs $60 to file your case and you aren't required to have legal representation. Tax small claims court is the only court that will hear a case before the tax is paid. On the downside, tax small claims court doesn't allow an appeal. You'll be stuck with the opinion of the presiding judge. (There is no jury in this court.)

With the assistance of an attorney, you can also appeal to the United States Tax Court, the United State Court of Federal Claims, or the United States District Court. These courts are independent of the IRS. While these appeals are more expensive and time consuming than tax small claims court, you can appeal decisions and have your case heard by a jury, at least in the lower court. For appeals to the U.S. Court of Federal Claims and U.S. District court, you must pay the tax first.


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