Administrative Appeals

AuthorW. Patrick Cantrell
Administrative Appeals
The IRS Appeals Office1
I. General Information
A. History
Prior to October 1, 1978, there were two administrative levels of appeal
within the IRS:
1. District conference
2. Appellate conference
This effectively gave taxpayers two bites at the apple prior to any
court action. Now, under the present system, assuming you cannot
reach agreement with the examiner, you have only one shot at appeal-
ing administratively within the IRS. The Appeals Office was formerly
known as the Appellate Division, and appeals officers were formerly
known as appellate conferees.
It is generally much more cost-effective to resolve a tax controversy
at the “function” (revenue agent or office auditor) level than at the
appeals level. However, sometimes you have no choice because exami-
nation personnel are often inflexible, poorly trained, or simply unquali-
fied to make a quality decision in a tax case. Most importantly, though,
examiners are unable to base decisions on “hazards of litigation.”
There are two types of appeals officials: appeals officers (AOs) and
settlement officers (SOs). SOs are officers who originally came from
IRS Collections. AOs, on the other hand, came up through the ranks
from IRS Examination. SOs typically handle cases such as offers in
compromise, trust fund recovery penalties (TFRPs), and collection due
process (CDP) hearings. AOs are generally less partial to the IRS’s case
than are revenue agents. However, sometimes you draw a new AO
who was formerly a revenue agent and who has not quite made the
attitude adju stment.
B. Qualifications of Appeals Officers (AOs)
1. Generally AOs are former revenue agents.
2. They need not be attorneys or CPAs, but they frequently are.
3. They are generally much more experienced and qualified than
revenue agents.
C. The Appeals Office is not under the jurisdiction of the management
structure in cha rge of IRS Collections or Examination and is, therefore,
theoretically considered to be independent of and not prejudiced by
the field personnel.
II. Protests
A. In a nondocketed case (i.e. a pre-ninety-day-letter case, or pre-90 case),
one can generally obtain an appeals conference only by preparing a
B. A protest is required only when there has been a field audit (i.e.,
conducted by a revenue agent, and not an office audit) and
1. The deficiency (or overassessment) is greater than $2,500.
2. If the deficiency is between $2,500 and $10,000, a brief written
statement of disputed issues is all that is needed in lieu of a formal
3. For purposes of the dollar limits discussed in 1 and 2, one counts
the amount of penalties and interest as well as tax.2
4. In the event of an office audit, all that is required is a simple
written statement that you wish to appeal.
C. As to the contents of a protest, there are two schools of thought:
1. Full disclosure (playing all your cards), or
2. Skeleton approach.
D. Minimum Requirements of a Protest
1. Statement that you disagree with the findings proposed in the
thirty-day letter and accompanying audit report (sometimes
referred to as an RAR) and a statement that you wish to appeal.
2. Date and symbols on the thirty-day letter.
3. The taxable periods covered by the examination.
4. A schedule detailing the specific items to which the taxpayer takes
5. A statement of facts relied on by the taxpayer.
6. A section containing all of the law and argument supporting the
taxpayer’s position, citing all pertinent authorities.
7. A statement that you are requesting a conference with an AO.
8. A declaration of truth and a signature.
9. Name and address of the taxpayer.
E. W hen the thir ty-day3 letter arrives, it is very important that it be promptly
responded to. It states that you have only thirty days within which to
prepare your protest and submit it to the office that issued the letter.
Protests 71
Extensions of time within which to file the thirty-day letter are entirely
discretionary with exam ination management. The examination office,
assuming the protest is in order, sends the case (the “administrative
file”) forward to the appropriate Appeals Office for consideration. Before
sending it to appeals, however, the revenue agent has an opportunity
to review the protest and prepare a written rebuttal. After the records
section of the Appeals Office receives the case, the assigned AO
generally sends out an acknowledgment letter and thereafter schedules
a mutually convenient time for a settlement conference. All conferences
are held at the Appeals Office location. AOs are generally not permitted
to travel to other locations to hold conferences.
F. A protest can be signed by a representative qualified to practice before
the IRS (see Circular 230) if the power of attorney (generally, a Form
2848) is attached or has previously been filed with the IRS. Protests
and briefs should be submitted at least five days before the scheduled
conference date.
Practice Tip
A practitioner should protest all issues even if some are weak. This gives
you some bargaining chips to be conceded as a part of the overall settlement.
G. Disadvantages of Filing a Protest
1. Additional cost.
2. Further delay in closing the case.
3. Possibility that new issues will be raised at the appeals level.
4. Interest and time-sensitive penalties will continue to accrue.
There is a school of thought that theorizes that protests should
rarely, if ever, be prepared. The rationale is that forcing the IRS to issue
a deficiency notice minimizes the involvement of the revenue agent in
the settlement process, thereby enhancing the prospects for a favorable
settlement. A petitioner is still entitled to an appeals conference fol-
lowed by settlement opportunities with counsel.
Practice Tip
Consider filing two separate protests. File the first one within the thirty-
day period allowed and make sure that it contains the minimum require-
ments to confer jurisdiction on the Appeals Office. This protest will be
read and analyzed by the revenue agent. Then, just a few days before the
scheduled appeals conference, submit a supplemental protest containing
the substance (including law, argument, and documentary evidence) of
your defense. This prevents the examiner from shoring up his or her case
and having an undue influence on the AO.

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