Appealing an Audit

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.


  • Appeals are fairly simple, are not time consuming, and are not costly (that is unless you opt to hire a tax professional.)
  • In the majority of cases, appeals result in some form of tax savings for the taxpayer.
  • Appealing buys you time by delaying your tax bill until your appeal has been processed, giving you what may be the necessary time needed for you to save your cash.


  • ·It is possible, though unlikely, that the Appeals Officer will pick up on issues that the auditor had overlooked previously, thus leaving you worse off then you were before the appeal. If you are afraid that additional deficiencies could be discovered, you can opt to skip the appeal altogether and go directly to Tax Court. In Tax Court, new issues cannot be raised.
  • Interest and possible penalties on your tax bill still continue to pile up even as you appeal. However, considering the amount of money it is possible to save by appealing, the added interest is not a valid reason for choosing not to appeal.