Your 2024 Guide to Resolving IRS Disputes: Navigating the Complex Journey from Audit to Appeal
The Internal Revenue Service (IRS) conducts roughly a million tax audits each year for the federal government. The purpose of an IRS audit is to review and examine an individual’s or organization’s financial information and accounts. The IRS wants to determine if the information reported on a federal tax return is accurate and complies with tax laws. The agency also verifies if the tax obligation on the tax return is correct to close the “tax gap” between the expected taxes paid and what it collects.
Our Maryland tax lawyer at Thienel Law has significant experience assisting individuals and companies with tax audits. This Guide to Resolving IRS Disputes answers common questions about IRS audits and appeals. You can also download our guide explaining IRS secrets about collection activities to help navigate the IRS collection process.
What Are the Odds of Being Audited by the IRS in 2024?
The IRS audits a small percentage of the federal tax returns each year. However, if your tax return is chosen, you might feel like the IRS is targeting you. The truth is that you might have been selected for an audit through a random process. According to the IRS, the process is based entirely on a statistical formula. However, the factors for the formula are often based on various triggers the IRS has identified from past audits that indicate a tax return might contain inaccurate or fraudulent information.
Why Am I Being Selected for an Audit?
If you are selected for audit, it could be because your tax return involves transactions with another audited return. For example, an investor or a business partner is being audited, and the IRS also decides to audit tax returns for their associates.
The IRS audits tax returns because of suspicious activity or “red flags.” These red flags include:
Failing to report income
Mathematical mistakes
Reporting excessive losses on Schedule C
Substantial changes in income
Claiming large charitable donations in relation to your income
Taking home office deductions
Reporting extremely large tax refunds
High volumes of cash transactions
Foreign assets, including cash and other property
Virtual currency transactions (i.e., cryptocurrency)
Claiming too many business expenses
Industries with high statistical compliance problems
Using round numbers that repeat throughout the return
There is not much anyone can do about their chances of being audited by the Internal Revenue Service. If your tax return triggers an audit. By knowing what can trigger an audit, you can be prepared with records to back up the figures on your tax returns.
How Do I Respond to an IRS Notice, and What if They Want to Audit Me?
If your tax return is chosen for an audit, you will receive a letter from the IRS by mail. The agency does not initiate audits by telephone, email, or other electronic means. Consult with a tax attorney or other tax professional promptly for assistance in responding to the audit notice.
You can deal with the IRS alone, but it is not advised for many reasons. Tax laws are complicated, and the IRS auditor is trained in tax rules. You’ll benefit from representation by someone who understands the law.
How Will the IRS Conduct My Audit?
Audits are conducted by mail or in person. If by mail, the IRS sends a detailed list of the documentation you must submit and the deadline for submitting the documents. In-person IRS audits might be held at an IRS office or at the taxpayer’s home or office. Sometimes, the audit might be held at the taxpayer’s accountant’s or attorney’s office.
What Do I Need to Provide?
The written request lists the documents you must provide for the audit. Examples of documents requested in an IRS audit include, but are not limited to:
Bank account statements
Receipts/proof of payment
Bills and invoices
Cancelled checks
Loan agreements
Medical and dental records
Employment documents
Documents verifying loss or theft
Business records
Legal documents
The IRS might request other documents based on the reason for the audit. Taxpayers are required to keep accurate books and records to prepare tax returns. At the very least, you should keep the records for tax returns for three years from the filing date of the tax return.
What If I Need More Time to Respond?
The audit notice provides a deadline for your response. If you need more time, contact the IRS to request an extension. Contact the assigned auditor or their manager for in-person audits to request an extension.
How Do I Know if the IRS Received My Response?
When you mail your response to the IRS, request confirmation of delivery. The U.S. Post Office has several services you can choose to confirm the IRS has received your response.
How Far Back Can the IRS Go to Audit Tax Returns?
Generally, the IRS does not go back further than three years when it conducts a tax audit. However, it could go back further if the auditor identifies substantial errors or problems with the audited returns.
How Long Does an Audit Take?
The time to complete an IRS audit depends on the factors involved with the audit, including the complexity of the issues involved, the type of audit performed, the availability of information requested, and the timeline for meetings. Providing requested information promptly could speed up the process, but not always.
What Are My Rights?
Under the Taxpayer Bill of Rights, you have specific rights regarding audits. Those rights include, but are not limited to:
A right to represent yourself or have an authorized representative
A right to confidentiality and privacy about tax matters
The right to be treated with courtesy and professionalism by IRS employees
A right to appeal disputes with the IRS and through the court
The right to know why the IRS is asking for information and what happens if you fail to provide the requested information
One of the most important rights is the right to representation. Hiring experienced tax attorneys or other tax professionals can be the best way to protect your other rights during an Internal Revenue Service audit.
How Does the IRS Conclude an Audit?
There are two potential outcomes for an IRS audit. First, the audit results in no change. You provide documentation that supports the figures and information reported in the tax returns, so nothing changes.
Second, the IRS may propose changes based on the IRS auditor’s findings. The changes often result in additional tax liability.
What Happens When You Agree With the Audit Findings?
If you agree with the findings from the audit, you are asked to sign a form or examination report acknowledging your agreement. You might also be required to file amended tax returns and pay any additional taxes owed.
What Happens When You Disagree With the Audit Findings?
If you disagree with the auditor’s findings, you can request a conference with an IRS manager to discuss why you disagree with the findings. You may also request mediation or file an appeal.
How Long Does It Take to Get Your Refund After an Audit 2024?
If the IRS audited your tax return in 2024, it could take four to six months for you to receive a refund. You can ask your tax professional if they have an idea based on the factors of your audit.
IRS Audit Appeal Process: How to Appeal IRS Audit Findings and Win
If you disagree with the findings of an IRS tax audit, you have the right to appeal the decision. Common questions about IRS appeals and tips to help you navigate an IRS audit appeal include:
What Are Tax Appeals?
Tax appeals are a way to resolve tax disputes and disagreements with the IRS, including disputing the results of a tax audit. The IRS Appeals Office is separate from the other IRS offices within the agency. You must send a formal written protest to request an appeal within 30 days of the date on the appeal notice letter from the IRS.
The request must state you are exercising your right to appeal, information about the tax returns/decisions you are appealing, and facts that support your position. Because your appeal request contains the grounds for an appeal, it is wise to hire a tax lawyer to file the appeal. Successful appeals require a strategic approach based on valid arguments and the tax code.
It is important to note that the IRS isn’t required to offer an administrative appeal after an audit. If not, you have the option of filing a petition in tax court to challenge the results of the audit.
How Long Does It Take for the IRS Appeals Office to Respond to an Appeal Letter?
The time it takes for the Appeals Office to respond to an appeal letter depends on the type of case and the time needed to review the file. Typically, you can expect a response within 30 days of filing your written protest. However, the Appeals Office could request additional time to respond to your request.
What Is a Fast Track Settlement?
Your first option to resolve your dispute with the audit findings is through fast-track settlement. Every taxpayer has this option to dispute an IRS tax bill after an audit. The IRS assigns a mediator or appeal agent to negotiate an amicable resolution and payment plan. However, if you cannot resolve your dispute through the fast-track settlement option, you can move forward with an appeal of the audit findings.
The 30-Day IRS Letter
You have 30 days to file your request for an appeal after receiving the IRS official audit findings letter. If you miss the deadline, you can file the appeal, but the request might not be granted. Therefore, it is crucial you pay close attention to this deadline.
The 90-Day Letter
A 90-day letter informs you of the amount you owe to the IRS and the deadline to pay that amount. If you missed your deadline for filing an appeal, you also receive a 90-day letter. You can receive this letter after pursuing the fast-track settlement and the 30-day letter option to explain your options if you still disagree with the proposed adjustments.
How to Respond to a 90-Day Letter
After receiving the 90-day letter, you can enter a payment plan with the IRS or pay the debt in full. If you disagree with the details of the letter, you can file a petition against the IRS in tax court.
The Appeals Conference
If you appeal the findings of an Internal Revenue Service audit, you will be required to appear at an Appeals Conference. The conference is a hearing where you can present your case with supporting documentation. The Appeals Conference is your chance to resolve the dispute without tax litigation. Therefore, substantial research is required to prepare your argument and support the argument with case law and applicable sections of the tax code.
Tips For Surviving IRS Audit Appeals
The following tips for surviving the IRS audit appeals process can help you focus your efforts in the right direction to win your appeal.
1. Evaluate Whether to Battle with the Internal Revenue Service
Before you begin IRS appeal, consider whether the fight is worth the effort. You must consider the cost of filing, preparing, and fighting an IRS audit appeal. Do you have accurate records and a valid legal ground for appealing the Internal Revenue Service audit findings? Is the money at stake worth the difference in winning or losing a fight with the IRS?
2. Seek Advocacy for the Appeals Process
You can obtain the email addresses of professional advocates from the IRS collection website. You may also visit the IRS Taxpayers Advocate Office to request professional help to understand your rights and options. However, these advocates must adhere to the IRS rules and the federal tax code. If you owe significant money to the IRS or your case is high profile, hiring a tax lawyer might be in your best interest.
3. Act Quickly and Get to the Point Immediately
If you disagree with the audit findings, try to file your appeal within 30 days after receiving the audit report from the IRS. Delaying the process could limit your options. It could also result in costly penalties and tax liens.
Review tax debt resolution plans to determine if you qualify. A Maryland tax attorney can explain the current options for resolving tax debts and how they could help you resolve your tax problem. You may also read our guide discussing new court-approved ways to defeat IRS penalties.
4. Strictly Adhere to Submission Deadlines
Adhering to filing deadlines with the IRS often works in your favor, including filing deadlines for tax returns. During an audit, your tax returns and finances are under a spotlight. The IRS agents must adhere to deadlines during the audit process. Delaying the timeline hurts your appeal.
5. Communicate With the IRS in Writing
All communications should be in writing. Having all IRS appeal correspondence in writing helps prove that you are not ignoring your tax obligations. Furthermore, written documents can be used as evidence when dealing with the IRS regarding a tax problem.
6. Negotiate With the IRS Commission
The Internal Revenue Service Commission can negotiate with taxpayers to set up installment payments. It can also work with taxpayers to arrive at a compromise that allows taxpayers in bad financial shape to resolve their IRS debt.
7. Convince IRS Agents to Accept Your Settlement Plan
You have a better chance of convincing the commission to work with you and accept a proposed settlement resolution if you focus on convincing the agents you have a valid dispute. Provide documentation and compelling arguments why the commission should agree with your position. If you spend your time arguing about pointless concerns or asking unnecessary questions, the IRS agents might be less likely to help you find a solution and settlement to your tax debt problem.
8. Hire Tax Attorneys and Take Your Case to Tax Court
If you cannot resolve your tax debt with any of the above methods, you might need to go to tax court. Before taking this step, consult an experienced tax attorney. Proceeding with tax litigation might not be in your best interest or be your best option for resolving tax debt from an IRS audit.
A tax lawyer analyzes your case and advises you of all options, including the option with the highest chance of a positive outcome. Whether you follow the appeals process or go to tax court, it is crucial to have trusted legal counsel.
Consult With a Maryland Tax Attorney About IRS Audits and Appeals
The above information is an overview of IRS audits and appeals. The audit and appeal process can be confusing, intimidating, and overwhelming. Instead of taking on the IRS alone, consider fighting that battle with a Maryland tax attorney.
At Thienel Law, our tax lawyer has substantial experience handling audits and appeals. Contact us to schedule a consultation to discuss your situation with a seasoned tax lawyer.
