Decisions of tax auditors are never final. The right of administrative appeal always exists; the right applies to correspondence and face-to-face audits. The IRS cannot unilaterally assess additional taxes…it must follow deficiency procedures and a Notice of Deficiency is required prior to assessment.
Other issues subject to appeal:
- Denial of penalty abatement request
- Rejection of termination of Installment Agreement
- Denial of Audit Reconsideration
- Denial of Offer in Compromise
- Assessment of Trust Fund Recovery Penalty
- Denial of Claim for Refund
There are four common varieties of audit determinations: The correspondence audit, Math error notice, Face-to-face examination and Non-filer determination.
- In a correspondence audit the IRS issues a CP 2000 –”We changed your account.” These are commonly issued when 1099s for dividends, interest or miscellaneous income are issued, but the income does not match the tax return. In 2012 1099Ks that match the gross receipts processed through credit card processors will be matched to tax returns. Taxpayer submits a Protest letter within 30 days.
- In a Math error notice the IRS issues a CP 12 or CP 21 –”We corrected your account.” This constitutes a “summary assessment.” Per IRC Code sec 6213 taxpayer must demand abatement within 60 days. IRS has the duty issue a Notice of Deficiency.
- Face-to-face examination – “We completed the audit.” The 1099K matching program will generate a logjam…expect expanded Face-to-face examinations. Submit a written protest letter within 30 days. The case is forwarded to Appeals Office for consideration.
- Non-filer determination – “You didn’t file, we filed for you.” This Substitute for Return determination…SFR… is subject to deficiency procedures. Submit a Protest Letter if tax is “proposed”; submit an abatement request if tax is “assessed”; file a Tax Court Petition if a Notice of Deficiency is issued.
Dana M. Ronald
Tax Crisis Institute
November 28, 2011