What do you do when you disagree with an IRS auditor?
A common misperception of IRS audits is that whatever the auditor says, stands.
The reality is far different – an IRS auditor’s findings are not final. It’s okay to disagree. You have options. The audit is not the end of the road.
First, the IRS has an internal administrative appeal process for review of all audit findings. Once the auditor is done, he will send you a letter summarizing his findings, and give you 30 days to appeal. If you appeal, the case will be sent to a separate IRS office where an independent IRS appeals officer will review the audit and your points of disagreement, trying to reach resolution.
But what if you feel battered by the audit, and want review from an outside, third party not affiliated with the IRS?
That’s were Tax Court steps in.
The Tax Court is a federal court – independent of the IRS. It reviews IRS actions – including audit results and intended collection enforcement actions – and decides if the IRS right, or if you are right. In essence, if you want to take an IRS audit to court, consider filing a petition to U.S. Tax Court.
Here are 5 reasons you can benefit by having the Tax Court decide your IRS dispute:
1. You will be able to testify to things the IRS auditor may not believe. Many audits get derailed by disagreements over what happened – How much did you pay your subcontractors? Were you conducting a hobby or a business? Was the trip you deducted for business or pleasure? In Tax Court, a judge will listen to your testimony, and will decide if you are right. Your fate is no longer in the hands of what the IRS believes to be true.
2. Your records – receipts, logs – the documentation you submitted to prove your case in audit - will be reviewed fresh by the Tax Court judge. Your testimony can supplement the documentation – permitting you to tell your story to ears other than the IRS. A common audit problem is the IRS bank deposit analysis – resulting in the IRS believing that you had more income than reported on your tax return. The Tax Court can review your bank statements, your testimony and your documentation proving that not all bank deposits were earned.