Using IRS Appeals to Resolve a Large Tax Assessment

How can IRS Appeals help resolve a large tax assessment?

When the IRS issues a large tax assessment, Appeals gives you a chance to have that decision reviewed by an independent Appeals Officer who is separate from the examination and collection teams. The Appeals process focuses on reaching a fair, efficient resolution without litigation. That can mean reducing assessed tax, removing penalties, agreeing on collection alternatives, or reversing the IRS position when the evidence and law support the taxpayer.

Below I explain practical steps, documentation you should gather, likely timelines, negotiation strategies, and next steps if Appeals does not resolve the assessment. In my work advising taxpayers for over a decade, clear organization and early engagement with Appeals materially improve outcomes.

When should you consider Appeals?

• After an audit report (examination) issues proposed changes or a Notice of Deficiency, and you disagree with the IRS’ findings.
• After a collection action (like a lien or levy) where you want a Collection Due Process (CDP) or Equivalent Hearing.
• When you receive a penalty assessment you believe is incorrect or disproportionate.

Appeals is usually appropriate before escalating to federal court. It can also be used to negotiate collection alternatives (installment agreements, offers in compromise) after a proposed assessment. For background and official guidance, see IRS Appeals (IRS.gov/appeals) and the Taxpayer Advocate Service resources (taxpayeradvocate.irs.gov).

How the Appeals process typically works (practical overview)

1. Respond promptly to notices. Many Appeals rights and hearings require timely requests. Timelines depend on the notice type (see timelines below).
2. File the request for Appeals as instructed on your IRS notice. That may be a written protest or a specific form (for certain collection actions taxpayers use Form 12203 for a request for Appeals review in some collection contexts). Always follow the exact instructions and deadlines on the notice (IRS: Appeals).
3. Prepare a clear, focused protest packet (if required). Include a succinct statement of facts, legal citations, and core supporting documents. If the case is complex, produce a one-page executive summary up front.
4. Participate in the Appeals conference. Appeals conferences are often telephonic or virtual since 2019 but may be in person for significant cases. You and your representative present your evidence and settlement position.
5. Negotiate. Appeals Officers seek resolution consistent with the tax law and sound administrative practice. They can recommend compromises when the case presents reasonable doubt of liability, doubt as to collectibility, or when the IRS’ administrative position is less persuasive.
6. Receive a written determination. Appeals will issue a closing agreement, settlement letter, or denial. If you’re unsatisfied, the letter will explain further appeal rights (e.g., petition federal court).

Authoritative source: IRS Appeals overview (https://www.irs.gov/appeals).

Timelines—what to expect

• Audit/examination: If you receive a report with proposed changes, the notice will generally state the timeframe to request Appeals — commonly 30 days from the date of the notice for a formal protest or Appeals request, but read your notice carefully.
• Collection Due Process (CDP): You usually have 30 days from the date of the lien or levy notice to request a CDP hearing with Appeals (special rules apply to individuals and businesses). See IRS CDP guidance for details.
• Notice of Deficiency (90-day letter): This is different — you have 90 days to petition U.S. Tax Court instead of filing an administrative protest. Appeals may still be involved depending on the case stage.

Deadlines matter. Missing the required window can forfeit Appeals rights. If you need more time to prepare, contact the IRS immediately and document your request; sometimes extensions are possible but not guaranteed.

Evidence and documentation checklist

Organize your packet into a clear, numbered binder or a PDF file with bookmarks. Include:

• Executive summary (1 page): concise statement of why the assessment is wrong and the relief requested.
• Timeline of events: audit dates, notices, and communications.
• Copies of the IRS audit report and the specific passages you contest.
• Underlying records: bank statements, receipts, invoices, contracts, canceled checks, payroll records, and depreciation schedules.
• Third‑party substantiation: appraisals, expert reports, or sworn statements where valuation or specialized facts are disputed.
• Legal support: relevant statute, regulations, Revenue Rulings, or case law summarized with citations.
• Prior tax returns, amended returns, and correspondence with the IRS.

In my practice, presenting a one‑page “what we concede / what we contest” chart reduces friction during the Appeals conference and focuses the officer on issues that matter.

Common Appeals strategies for large assessments

• Narrow the issues. Don’t force Appeals to wade through unnecessary minutiae. Identify the core legal or factual disputes.
• Pursue alternative theories. If primary positions are weak, introduce reasonable alternatives that reduce exposure (e.g., allocation of income, basis adjustments, or reasonable valuation ranges).
• Use credible third‑party valuations. Large assessments tied to valuation, damages, or business income often hinge on a credible expert report.
• Negotiate collection alternatives simultaneously. If liability is likely but payment ability is limited, Appeals can negotiate installment agreements or recommend an Offer in Compromise (OIC) as an administrative solution. For detailed OIC guidance see our Offer in Compromise (OIC) coverage: Offer in Compromise (OIC).
• Bring a prepared settlement posture. Say what you’ll accept and what you won’t — that clarity helps an Appeals Officer evaluate settlement feasibility.

Possible outcomes

• Sustained in full: the IRS position is upheld.
• Modified: assessment reduced (common outcome in negotiated settlements).
• Reversed: the IRS position is withdrawn and assessment removed.
• Compromise settlement: partial payment, installment plan, or OIC recommended.

Appeals results are documented in writing. If you accept a settlement, there will be closing paperwork; if you disagree, the Appeals letter will explain further rights.

When to involve a tax professional or attorney

Hire experienced representation when:

• The assessment is large (six figures or higher) or complex.
• The facts require specialized valuation or expert testimony.
• You face potential criminal referral or significant civil penalties.
• You lack the time to prepare a compelling protest and organize evidence.

See our guide on when to hire help: When to Hire a Tax Professional for an Audit or Appeal. In my experience, a well‑prepared representative saves time and often reduces net tax and penalties through more effective negotiation.

Mistakes to avoid

• Waiting to engage Appeals or ignoring notices.
• Submitting disorganized or incomplete evidence.
• Overloading your packet with irrelevant documents — focus on key proof.
• Failing to quantify settlement positions (have clear damage, penalty, and interest numbers).

If Appeals does not resolve the case

Options include:

• Petitioning the U.S. Tax Court (if applicable) within the statutory timeframe (e.g., after a Notice of Deficiency), or filing in U.S. District Court/Court of Federal Claims depending on the case and refund jurisdiction.
• Seeking Taxpayer Advocate Service assistance if you have economic hardship or systemic IRS delay (see Taxpayer Advocate Service on IRS.gov).

Litigation should be a last resort because it is costly and time-consuming. Appeals exist to save both parties the expense of court.

Practical timeline example (typical—but varies)

• 0–30 days: Review IRS notice, decide to request Appeals, assemble initial protest/packet.
• 30–90 days: Appeals acknowledges receipt and schedules conference; parties exchange position papers.
• 3–9 months: Appeals conference(s) and negotiation.
• 6–12 months: Written Appeals determination (may be shorter or longer depending on complexity and Appeals inventory).

Final tips — increase your chances

• Start early and organize. Use a single PDF with bookmarks and an index.
• Present a concise legal and factual story; avoid emotional appeals.
• Be realistic about settlement ranges and prepare to support reduced liability with credible calculations.
• Keep all correspondence and track deadlines.

Professional disclaimer

This article is educational and does not substitute for individualized tax or legal advice. Tax situations are fact-specific; consult a qualified tax professional or attorney before acting on matters relating to your particular case.

Authoritative resources

• IRS Appeals overview: https://www.irs.gov/appeals
• Taxpayer Advocate Service: https://taxpayeradvocate.irs.gov/

Internal resources

• Offer in Compromise (OIC): https://finhelp.io/glossary/offer-in-compromise-oic/
• When to hire a tax professional for an audit or appeal: https://finhelp.io/glossary/when-to-hire-a-tax-professional-for-an-audit-or-appeal/
• Audit overview and how audits progress: https://finhelp.io/glossary/audit/

In my practice, taxpayers who prepare a tight, issue-focused packet and engage Appeals early see faster resolutions and better settlement outcomes. Appeals is designed to be neutral and pragmatic — use the process to present your strongest evidence and a realistic settlement posture.