Background and purpose of the appeals process

The IRS Office of Appeals exists to provide an independent, administrative review of disputes between taxpayers and the IRS without immediate court involvement. Created to reduce the burden of litigation and to let the parties reach a fair settlement, Appeals takes a “fresh look” at the facts and legal issues, separate from the audit or collection teams that produced the initial decision. The IRS explains the function and options of Appeals on its site: https://www.irs.gov/appeals.

In practice, Appeals is often the most cost-effective and pragmatic step when you disagree with an IRS assessment, proposed adjustments after an audit, a denied refund claim, or a proposed lien or levy. From my experience advising clients for over 15 years, many disputes resolve at Appeals through clear documentation and targeted negotiation. Appeals can also offer alternative dispute resolution (ADR) tools—such as mediation or fast-track settlement—when standard negotiation stalls.

When should you use the administrative appeals process?

Use the appeals process when you receive any formal IRS notice that proposes adjustments, penalties, or collection actions you intend to contest. Common situations include:

  • A Notice of Deficiency (the so-called “90-day letter”) proposing additional tax. (If you receive this, you generally have 90 days to file a petition in Tax Court.)
  • Audit adjustments proposed in a Statutory Notice of Deficiency or in a Revenue Agent Report.
  • Collection notices such as a Final Notice of Intent to Levy or a Notice of Federal Tax Lien. These may allow a Collection Due Process (CDP) hearing with Appeals.
  • Denied claims for relief, such as innocent spouse relief or penalty abatements.

For collection actions specifically, the Collection Appeals Program (CAP) and CDP hearings are the primary administrative routes; the IRS details collection appeals at https://www.irs.gov/payments/collection-appeals-program-cap.

Step-by-step: How the appeals process generally works

  1. Read the notice carefully and note deadlines
  • Immediately review any IRS notice you receive. Notices list the reason for the proposed action and include timelines for requesting Appeals or filing in Tax Court. Missing a deadline can forfeit your right to administrative review or to go to Tax Court.
  • Example: a Notice of Deficiency typically gives 90 days from the date mailed to file a Tax Court petition (150 days if the notice is mailed outside the United States). U.S. Tax Court confirms these deadlines on its site: https://www.ustaxcourt.gov/.
  1. Attempt informal resolution first
  • Many issues are resolved at the audit-rep level. Contact the revenue agent or examiner, provide any missing documents, and ask for reconsideration. Keep written records of every contact.
  1. Prepare and file a written protest (when required)
  • For certain cases (large-dollar adjustments), Appeals requires a formal written protest. Even if a formal protest is not mandatory, submit a clear statement of why you disagree, supported with exhibits: returns, receipts, bank records, engagement letters with preparers, and any contemporaneous explanation.
  • Include the tax year, the specific adjustments you contest, the legal and factual bases for your position, and the relief you seek.
  1. Request an Appeals conference
  • You or your authorized representative (CPA, attorney, or enrolled agent with a power of attorney, Form 2848) can request a conference. Appeals hears cases by correspondence, phone, virtual meeting, or in person. Expect the Appeals Officer to ask pointed questions and to request concise evidence.
  1. Use ADR tools where appropriate
  • Appeals offers ADR options—mediation, fast-track settlement, or early referral to Appeals—to speed resolution. ADR can be especially useful in complex factual disputes or when there are multiple penalties involved.
  1. Receive Appeals’ proposed resolution or a Notice of Determination
  • Appeals will either propose a settlement, decline to settle, or issue a notice of determination (in collection cases). If Appeals and the taxpayer cannot agree, the taxpayer may have the right to petition the U.S. Tax Court or pursue other judicial avenues, depending on the notice type.
  1. File a petition in U.S. Tax Court if necessary
  • If you received a Notice of Deficiency, file a petition with the U.S. Tax Court within the 90-day window to preserve your right to judicial review without paying the proposed tax first. For a Collection Due Process (CDP) hearing, if Appeals issues an adverse determination, you generally have 30 days to file a petition in Tax Court challenging the determination.

Real-world examples (de-identified)

  • Small business underreported income: A client received an audit adjustment that added $18,500 to taxable income. We prepared a focused appeals packet featuring bank deposits reconciled to invoices and contemporaneous accounting records. After a virtual Appeals conference and introducing a third-party accountant’s affirmation, Appeals substantially reduced the adjustment, saving the client taxes and penalties.

  • Denied business expense: Another client appealed a disallowed business deduction. We assembled a multi-year pattern of expense treatment, receipts, and an industry-standard explanation of the business purpose. Appeals negotiated a partial concession that removed the penalty and lowered tax exposure.

These examples illustrate two consistent themes: (1) early, organized documentation helps; and (2) Appeals officers respond better to clear, narrowly focused arguments than to long, unfocused submissions.

Who is affected and eligibility

Individuals, small businesses, corporations, estates, and trusts that receive adverse IRS notices are eligible to request Appeals review, provided they meet the statutory timelines and procedural requirements. Authorized representatives with Form 2848 can act on behalf of taxpayers. Collection issues have distinct procedures (CDP and CAP), while audit adjustments and deficiency notices follow the general Appeals route.

Practical strategies and professional tips

  • Respond early and in writing: Preserve your right to take the case to Tax Court by meeting deadlines; put important points in written correspondence so they are in the administrative record.
  • Limit your packet to relevant evidence: Appeals officers prefer concise, well-organized exhibits (tabbed, indexed, and clearly labeled). Long, unstructured submissions are less persuasive.
  • Use representative help wisely: A tax attorney or enrolled agent can draft a focused protest and represent you at Appeals; in many cases, the cost of expert help is less than the additional tax, penalties, and interest you might face.
  • Consider ADR: Mediation or fast-track settlement can resolve disputes quicker and at lower cost than full litigation.
  • Preserve original records: Keep tax returns, receipts, contemporaneous notes, business contracts, and bank statements for at least the statute of limitations plus any open audit years.

Common mistakes and misconceptions

  • “Appeals is just a rubber stamp”: Appeals is independent and often reverses or reduces IRS positions. Treat it as a meaningful chance to resolve disputes without court.
  • Missing the Tax Court deadline: If you receive a Notice of Deficiency, do not ignore the 90-day deadline. Filing a timely petition is the only way to secure a prepayment Tax Court review.
  • Overloading with irrelevant documents: More is not always better. Targeted, well-labeled evidence works best.
  • Ignoring collection appeal options: If faced with a lien or levy, you may be eligible for a Collection Due Process hearing—a different procedural route with its own timelines and remedies.

Frequently asked questions

Q: How long does the Appeals process take?
A: Times vary. Simple cases can resolve in weeks; complex cases may take many months. Appeals workloads and ADR schedules affect timing. The IRS and Appeals websites provide timeline guidance.

Q: Can I go to Tax Court instead of Appeals?
A: It depends on the notice. A Notice of Deficiency allows direct Tax Court petition without paying the tax; collection cases usually require pursuing CDP or administrative remedies first. Consult the specific notice language and legal counsel.

Q: Must I pay the tax while the appeal is pending?
A: For a Notice of Deficiency Tax Court petition, you do not pay the proposed tax before filing the petition. For other IRS collection actions, payment or posting bond may be required to stay collection—details depend on the notice type.

Professional disclaimer

This article is educational and not legal advice. Tax law changes and case-specific facts affect outcomes. Consult a licensed tax attorney, CPA, or IRS-authorized representative for guidance tailored to your situation.

Authoritative sources and further reading

Internal resources from FinHelp.io

By following the steps above—review notices, build a focused record, use Appeals and ADR where appropriate, and file timely petitions when necessary—you can preserve rights and often resolve disputes without the time and expense of formal litigation. In my practice, the right mix of preparation and targeted negotiation frequently produces better outcomes than immediate litigation.