Pros and Cons of Appealing an IRS Audit
Filing an appeal, in the majority of cases, results in some savings but rarely a total victory.
Here are some of the pros and cons to appealing an IRS audit and the steps you need to take to get started.
Pros
- Appealing is simple and costs nothing, unless you use a tax pro (an accountant or tax attorney) which is not required.
- Appealing can delay your audit tax bill for months, buying you time to raise cash or consider other payment options.
- Appealing, in the majority of cases, results in some tax savings (although rarely a total victory).
Cons
- The appeals officer can raise issues the auditor missed which could cost you more money but this almost never happens. However, if you are afraid that a particular item will be discovered and you'll owe a lot more in taxes, you can skip the appeal altogether and go directly to tax court, where new issues can't be raised. You should consult a tax pro before skipping the appeal process, though.
- Interest on the tax bill continues to run while you are appealing, but this is usually a small item compared to the tax savings that are likely to result.
How to start an appeal:
- Write a protest letter and send it to the local IRS district director.
- Organize your records to prepare for the appeals hearing.
- Make a Freedom of Information Act request for the auditor's records so you can see what the auditor is seeing.
- Consult with a tax pro if you need help with any tax law issues.
To Learn More
Get the information and strategies you need to deal with the IRS in Nolo's Stand Up to the IRS, by Frederick Daily.
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