One of the most challenging aspects of dealing with the IRS and/or state tax authorities is receiving an adverse decision, even though you are confident that the facts are in your favor or that your specific circumstances merit additional consideration. Many taxpayers feel they are being unfairly or disproportionately punished for having made an honest mistake or omission, or for having hired a tax preparer or accountant who misrepresented something on a filing without their knowledge. Others are frustrated by a process in which they feel the IRS does not correctly understand their true financial circumstances or life situation. For example, the IRS might assert that you have enough income and assets to pay your entire tax debt right now, when in fact you do not, and will not any time in the foreseeable future.
When taxpayers have their petition or offer rejected by the IRS or a state tax authority, or are unhappy with the outcome of an audit, or receive a tax lien or levy, their first instinct is often to hide. The legal and technical language of tax paperwork can be intimidating, and there can be lots and lots of numbers and documentation involved, some of which you may no longer have. It often feels like one small person can't win against a massive and slow-moving government bureaucracy that has the power to seize your assets and property, garnish your wages, ruin your credit, and stop you from selling your house by putting a tax lien on it. Even bankruptcy—which some people consider as a last-ditch option—can fail to wipe away certain tax debt, meaning that it can follow you around for the rest of your life, like student debt or court-ordered child support. In fact, this is all by design: the system is set up so that you feel overwhelmed and want to give up, even though Congress has taken explicit action to encourage taxpayers to challenge adverse decisions. After the last reorganization of the IRS, in 1997, a separate Appeals unit was formed, whose function is to provide an independent review of actions taken by other IRS groups, such as Collections and Offer Examiners. Unfortunately, many taxpayers aren't aware of this unit, or the appeals process.
The good news is that most issues with the IRS (and state tax authorities) can be dealt with through appeals. These include adverse decisions on audits, Offers in Compromise, payment plan or installment plan requests, petitions for innocent spouse relief, and requests for penalty abatement, as well as liens and levies. In fact, we can tell you from experience that in many cases the initial rejection you receive is all but a foregone conclusion because the IRS is so short-staffed that they lack enough personnel to give you full consideration the first time around—in essence, you must file an appeal to have any real chance at a full hearing. Unfortunately, even the Appeals unit is understaffed, and while some appeals might be heard within a month or so, others kinds (for example, appeals related to tax liens) may take three months or longer to get a hearing.
What if the IRS rejects your appeal? A typical next step would be to file a petition in U.S. Tax Court, a specialized federal trial court that focuses entirely on resolving disputes between taxpayers and the Internal Revenue Service. Once your case is docketed (scheduled to be heard), the IRS Appeals unit will have greater leeway to negotiate with you, and in most cases a settlement can be reached with the IRS without having to actually bring your case to trial. However, litigating in U.S. Tax Court is always an option. As you can see, this stage of appeals must be handled carefully, and it is a good idea to hire an experienced tax attorney who is admitted to the U.S. Tax Court Bar to represent you. Taxpayers who try to represent themselves in U.S. Tax Court often arrive unprepared and lose.
The individual state tax authorities also allow for appeals, but the precise terminology, procedures, details, and deadlines vary considerably from state to state. Typically your appeal will be heard by a special state court (often called an Office, Board, or Tribunal) staffed by Administrative Law Judges, such as the Michigan Tax Tribunal, the Ohio Board of Tax Appeals, the New York State Tax Appeals Tribunal, or California's Office of Tax Appeals.
Gold Path Tax can help you with all aspects of the appeals process, including preparing the appeal and navigating the appeals process—up to and including litigation in U.S. Tax Court, if appropriate. We have a lot of experience negotiating with the IRS, and we will try to get you the best possible solution to your tax problems. We can also help you appeal your state tax problems as well, including litigation in appropriate venues when allowed by state law. Contact us for a free initial consultation with a tax attorney about your situation. Call us at 248-246-1154, or e-mail firstname.lastname@example.org.