The IRS must issue a 30-day notice of the right to appeal a proposed adjustment to the client’s taxes, notices of federal tax liens, notices of intent to levy, denial or termination of an installment agreement, or denial or termination of an Offer in Compromise. To obtain an appeal with the IRS Appeals Office, the taxpayer must file an appeal within 30 days of the notice. If this appeal deadline is not met, the taxpayer may face unnecessary levies. Missing the deadline may also limit the taxpayer’s remedy to a Tax Court petition, which entails additional costs and delays beyond an appeal to the IRS Appeals Office.

An appeal to the IRS Appeals Office is not a requirement for Tax Court review. Because the court’s review of initial determinations of tax liability or innocent spouse relief is de novo, proceeding through the IRS Appeals Office may not be necessary in those cases. However, for collection disputes, the failure to timely take an administrative appeal will, as a practical matter, prevent success in the Tax Court, which will employ an abuse-of-discretion standard and may decline to review issues not raised at the appeal hearing.1

• 1The abuse-of-discretion standard governs judicial review of collection due process appeal determinations on lien, levy, installment agreement, and offer-in-compromise decisions unless tax liability or innocent spouse relief issues are involved. Murphy v. Comm’r, 125 T.C. 301, 307 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). Absent special circumstances, the Tax Court will not consider new evidence in an abuse-of-discretion case that is not related to an issue raised in the appeal hearing. See Giamelli v. Comm’r, 129 T.C. 107 (2007).

A protest letter or appeal letter should be filed within 30 days of an adverse action by the IRS1 . Your letter should unequivocally state that you are appealing and request a conference with an Appeals Officer.2

Appeals Officers are usually senior IRS employees. They are instructed to settle cases. 85% of appeals cases are settled. The Appeals Officers are aware of the law on common issues. They want to know the facts of your case. They are not supposed to develop the facts themselves.3 Rather, their role is to adjudicate facts and evaluate the “hazards of litigation.” 

Convincing the Appeals Officer that there are hazards of litigation will enhance the probability of a favorable settlement. The IRM states that settlements resolve each issue based on the probable result in litigation or involve mutual concessions of issues based upon the relative strength of the opposing positions when there is substantial uncertainty as to the outcome in litigation.4 Appeals Officers have broad authority to settle cases. Their settlement authority is, however, restricted if there is a judicial or revenue ruling directly on point.

• 1See IRS Publication 5 for information on how to appeal.
• 2Procedures for appeals conferences are described in I.R.M. 8.6.
• 3Appeal Officers are prohibited from ex parte communications with the auditors. Rev. Proc. 2000-43, 2000-43 IRB 404; see Adomowicz v. United States, 531 F.3d 151 (2d Cir. 2008); Robert v. United States, 364 F.3d 989 (8th Cir. 2004); Drake v. Comm’r, 125 T.C. 201 (2005) (remanding case with order that a new, independent Appeals Officer be assigned to case).
• 4I.R.M. 8.6.4.1.