Changes in the IRS Office of Appeals– Do New Rules Create a More Fair and Impartial Process?

You’ve been the subject of an IRS audit. The result was not favorable to you. Do you want to appeal the examiner’s opinion? Prior to September 2, 2014, appealing the result of an audit could be a risky endeavor. IRS appeal agents had significant discretion in reviewing audits. They could conduct their own further investigations, perhaps uncovering issues missed by your original auditor. You could end up owing more after the appeal than before you started.

In response to agency concerns that the public viewed the IRS audit and appeal process as unfair, on September 2, 2014, the IRS Office of Appeals changed the way it handles appeals to examination decisions. The IRS Director of Policy, Quality and Case Support wrote in a memo to appeals staff that the new rules were enacted with the “goal of enhancing internal and external customer perceptions of a fair, impartial and independent Office of Appeals.”

Under the new process, appeals officers are no longer able to act as examiners or investigators. Now, the IRS Office of Appeals may only hear cases that are “fully developed”. The Director’s memo defines a fully developed case as one that “has all pertinent evidence well documented with an easy to follow audit trail.” An appeals officer may only determine a case to be not fully developed and return it for further examination if:

• The case does not set forth the taxpayer’s protest, or reason for appeal
• The case does not set forth the taxpayer’s protest, or reason for appeal
• Technical advice is still pending at the time of the filing of the appeal
• An action that must be taken or an event that must occur before the Office of Appeals can adequately consider the case has not occurred
• A potential fraud is discovered
• A taxpayer provides new information or evidence that the original auditor did not have an opportunity to consider

Regarding the last point above, the Office of Appeals does note that there is a difference between new information and new legal issues. The Appeals Office may consider any new legal issue a taxpayer offers, but if an officer believes the issues are being raised at appeal as a delay tactic, the officer has the discretion to decide the case without considering your new theory.

Decisions as to what information you should present or what legal theories should offer during an audit can be difficult and can prove crucial to the outcome of not only the examiner’s decision, but also to the viability of any appeal you might want to make.

If you have received notification of an IRS audit, the professionals at Nielsen Law Group can assist you in the preparation of your response or the preparation of your appeal. Call (480) 888-71111 or submit a web request here.