At the conclusion of an audit, a Revenue Agent or Tax Compliance Officer will write up their report with a Notice of Deficiency Waiver. Once you sign this form, you are allowing the IRS to assess and collect the tax. A Taxpayer should never sign this form if they disagrees with the amount the IRS claims they owe. The Taxpayer will lose his right to appeal.
Historically, the Revenue Agent’s report would allow you to appeal the IRS’s findings by filing a written protest within 30 days. However, due to new Appeals protocol, the 30-day letter is all but being phased out.
The IRS has three years from the date of assessment on a tax return to examine that return. Due to budget stresses and manpower cutbacks, the IRS isn’t even commencing most audits until almost 18 months into this three-year window.
During mid-2013, the IRS Office of Appeals released the AJAC project…this acronym stands for The Appeals Judicial Approach & Culture Project. Chief among its new policies and procedures is the requirement that Appeals wants one year remaining on the statute to take a case. Up until this point, it had always been six months.
The effect of this policy is going to be to force Revenue Agents and Tax Compliance Officers to issue Statutory Notice of Deficiencies or 90-day letters on all un-agreed cases. In effect, all appealed cases are going to United States Tax Court. Everything in the AJAC project is designed to promote a “quasi-judicial” approach in the manner in which Appeals conducts its business.
The goal of a Revenue Agent is to report all income producing issues; to the contrary, the function of the Appeals Officer has been to resolve your case on an impartial basis. One of AJAC’s policies and procedures is for the Appeal’s Officer to send the case back to the Revenue Agent or Tax Compliance Officer to do field investigation.
By law, Appeals must be independent in appearance and in fact//there is an Exparte prohibition of communication between an Appeal’s Officer and a Revenue Officer or Tax Compliance Officer. How independent and impartial Appeals officers will be under the new policies of AJAC is yet to be seen.