Appeals Procedure

If a tax return is examined by the IRS and the taxpayer does not agree with the results of the examination,
further appeal within the IRS is permitted ( Reg. §601.106). 5 Once the IRS has issued a preliminary 30-day
letter, the taxpayer has the right to appeal to a local Appeals Office by filing a written request for appellate
consideration. This is the only level of appeal within the IRS, disregarding the functions of the National Taxpayer
Advocate ( ¶2707). Appeals conferences are conducted in an informal manner. A taxpayer who requests a
conference may also need to file a formal written protest. If the protested amount is not more than $25,000 for
any tax period, however, a taxpayer may make a small case request instead of a formal written protest ( IRS
Pub. 556). Taxpayers who wish to forego the right to submit a protest to the Appeals Office after receiving a 30-
day letter can file a petition in the Tax Court within 90 days after the receipt of a statutory notice of deficiency.
The IRS is required to develop certain appeals dispute resolution procedures ( Code Sec. 7123). 6 Accordingly,
the IRS has established procedures under which any taxpayer may request early referral of issues from the
examination or collection division to the Office of Appeals ( Rev. Proc. 99-28). Additionally, procedures have
been developed under which either a taxpayer or the Office of Appeals may request nonbinding mediation of any
unresolved issue at the conclusion of the appeals procedure or an unsuccessful attempt to enter into a closing
agreement or an offer in compromise ( Rev. Proc. 2014-63). An appeals arbitration process under which the
Office of Appeals and the taxpayer may jointly request binding arbitration has been eliminated due to lack of use
( Rev. Proc. 2015-44).
In addition, the Secretary of the Treasury is required to establish procedures under which an organization that
is either exempt from tax under Code Sec. 501(a) because of its status as a Code Sec. 501(c) organization (or
belief that it qualifies for status as a 501(c) organization) can request an administrative appeal—together with
a conference related to that appeal, if so desired—in response to receiving an adverse determination ( Code
Sec. 7123(c), as added by the Protecting Americans from Tax Hikes (PATH) Act of 2015 ( P.L. 114-113)). For
this purpose, an adverse determination is one that is adverse to the organization’s exempt status, regardless of
whether that involves the organization’s initial qualification or the continuing classification of the organization,
concerning whether the organization is: (1) an organization described in Code Sec. 170(c)(2), (2) exempt
from tax under Code Sec. 501(a), (3) a private foundation under Code Sec. 509(a), or (4) a private operating
foundation under Code Sec. 4942(j)(3).
Small business and self-employed taxpayers can resolve certain tax disputes through fast-track mediation ( Rev.
Proc. 2016-57, obsoleting Rev. Proc. 2003-41, effective on Nov. 18, 2016). Disputes will be resolved through this
expedited process within 30 to 40 days, compared to several months using the regular appeals process.
Large- and mid-size businesses can resolve their tax disputes through a fast-track settlement program ( Rev.
Proc. 2003-40). The goal for this program is to reach settlement within 120 days. A similar fast-track settlement
program exists for small businesses and self-employed taxpayers as well ( Announcement 2011-5). A fasttrack
settlement program for tax-exempt and government entities has also been established ( Announcement
2012-34). The goal for both this program and the small business and self-employed taxpayer program is to reach
settlement within 60 days. Additional criteria may be found on the Appeals Mediation Programs webpage on the
IRS website.