So your audit did not go as well as you hoped. Your auditor was very cranky, not to mention completely unreasonable. He simply refused to see things your way no matter how hard you tried to persuade him. The results were not much different when you attempted to try your hand with his supervisor either. Now your frustrated and stuck with a costly Examination Report to deal with. What's a taxpayer to do? File a formal appeal, that's what. The IRS has a procedure whereby you can appeal Examination Reports that you hold in dispute through an IRS Regional Appeals Office. IRS Publication 5, Appeal Rights and Preparation of Protests for Unagreed Cases can assist you in providing more details in the matter.
Only less than one in ten audited taxpayers actually choose to appeal, yet there are no good reasons for such a small turnout. The act of appealing is neither time consuming nor costly. Not to mention, (and we bet you didn't know this one) that the odds of winning your appeal are very good! We don't mean to say that you can expect to walk away owing nothing. Most of the time that just isn't going to happen. What we do mean is that the average appeal results in a 40% decrease in taxes, interest and penalties. Now that's good news! It is even rumored that some auditors actually refer to the Appeals Office as the IRS' gift shop. The official IRS position on the appeals process, according to the IRS Internal Revenue Manual, is as follows:
The appeals mission is to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the IRS.