Appeals… Resolving Tax Disputes
Is Appeals right for you?
The Appeals mission is to settle tax disagreements without having to go to Court and a formal trial. Appeals is here to assist you if you don’t agree with a tax decision. The Office of Appeals is independent of any other IRS office and provides a venue where disagreements concerning the application of tax law can be resolved on a fair and impartial basis.
Our office represented hundreds of clients on their appeals with the IRS. Please contact us at 562-868-6333 to see if Appeals would be the best approach for you.
Many of the different departments within IRS are responsible for making decisions concerning the application of tax law to various taxpayer issues. In some cases, agreement on these decisions, or determinations, cannot be reached. In other words, the taxpayer does not agree with the determination.
This is where Appeals comes in. Appeals is independent of any other IRS office and serves as an informal administrative forum for any taxpayer who disagrees with an IRS determination. Appeals provides a venue where disagreements concerning the application of tax law can be resolved on a fair and impartial basis for both the taxpayer and the government. The mission of Appeals is to settle tax disagreements without having to go to the Courts and a formal trial. Make sure you discuss this appeal process with a tax professional.
What Can Appeals do for you?
Appeals is the place for you if:
- You received an IRS correspondence explaining you have the right to come to Appeals to dispute an IRS decision.
AND - You do not agree and are not signing an agreement form sent to you.
If you meet the above qualifiers listed above then you may be ready to request an Appeals conference or hearing.
Appeals is not for you if:
- Your only concern is that you cannot afford to pay the amount you owe.
- The correspondence you received from the IRS was a bill and there was no mention of Appeals.
If you cannot identify the requirements, or if you do not meet the conditions for coming to Appeals as explained above, please contact us at 562-868-6333 to discuss whether an Appeals is the place for you or not and how we can assist you specific situation.
Are You Ready to Request an Appeals Conference or Hearing?
Consider the following:
- If you need help in deciding whether the IRS made an incorrect decision due to misinterpreting the law, check the publications discussing your issue(s) for additional information, or refer to Tax Topics.
- If you believe the IRS did not properly apply the law due to a misunderstanding of the facts, be prepared to clarify and support your position refer to the Examination page.
- If you believe the IRS is taking an inappropriate collection action against you, or you do not agree with Collection’s denial of your offer in compromise, refer to the Collections page.
If you believe the facts used by the IRS are incorrect, then you should have records or other support available to back up your position.
Preparing a Request for Appeals
Review the letter and publication(s) that were sent to you by the IRS department making the decision. These will tell you:
- How to prepare a request for an appeal (protest)
- Where to mail the request
- When the request must be received
- What information you need to include in the request for an appeal
For specific information appealing Examination issues, refer to the Examination page.
For specific information appealing Collection issues, refer to the Collection page.
FILING A REQUEST FOR APPEALS DOES NOT STOP INTEREST AND PENALTIES FROM ACCRUING
Interest and certain penalties will continue to accrue during the Appeals process and during any subsequent Appeals to the Courts on any amount not paid. In order to stop the accrual of interest and penalties on proposed adjustments, refer to Notice 1016, How to Stop Interest. For an explanation on how to stop interest from accruing on an unpaid balance, refer to Publication 594, What You Should Know About the IRS Collection Process.
What Can You Expect from Appeals?
Appeals is independent of any other IRS office and provides a venue where disagreements concerning the application of tax law can be resolved on a fair and impartial basis for both the taxpayer and the government.
An Appeals or Settlement Officer will review the strengths and weaknesses of the issues in your case and give them a fresh look. Appeals conferences are conducted in an informal manner, by correspondence, telephone or in person. Most differences are settled in these appeals without expensive and time-consuming court trials. Appeals will consider any reason you have for disagreeing, except for moral, religious, political, constitutional, conscientious objection, or similar grounds. Our goal is to provide a forum for us to work together to resolve the tax dispute.
Our Commitments
- Explain your appeal rights and the Appeals process
- Listen to your concerns, be courteous and professional
- Be timely and responsive
- Be fair and impartial
Your Responsibilities
- Listen to our explanation of your appeal rights and the Appeals process
- Give us a statement as to how you understand the facts and the law, listing all issues with which you disagree and why.
- Give us any additional information or documentation that will be helpful to your case within a reasonable time.
- Tell us when and how you think your case should be resolved.
- Let us know the best time to contact you.
Frequently Asked Questions
Q. I sent in my appeal request/protest. How long will it be before I hear from the Appeals office?
A. This varies, depending on the type of case you are appealing and the time needed to review the file before sending your case to Appeals. Normally, you can expect to hear from an Appeals employee within 90 days after you file your appeal request.
If more than 90 days have gone by and you still haven’t heard from Appeals, you should contact the office where you sent your appeal request. They can tell you when they forwarded your case to Appeals. If they were delayed in sending your case, you would not expect to hear from Appeals until at least 90 days from that date. If more than 90 days has gone by and there is no known delay, ask that office to contact Appeals to get a time frame for when Appeals will contact you. You can also contact an Appeals Account Resolution Specialist (AARS) in Fresno Appeals at 559-456-5931. After researching the Appeals data base, they can tell you if your case has been assigned to an Appeals employee, their name and number and you can contact that employee directly.
Q. How long will it take to resolve my case once it is received in Appeals?
A. It depends on the facts and circumstances. It could take anywhere from 90 days to a year. Appeals continues to work towards reducing the time to resolve cases. Your Appeals Officer or Settlement Officer can provide you with a more specific time frame.
Learn more about what to expect of the Appeals process in these online videos.
Can you reconvert an IRA?
Suppose you converted your IRA to a Roth IRA just before the bottom fell out of the stock market last year. Because the tax liability for the conversion is based on the value of the account on the last day of the prior year – Dec. 31, 2007 — you would have paid tax on an inflated value. So you may have opted to recharacterize your Roth into a traditional IRA.
But now you see signs of a market rebound. And you’d like to take advantage of the Roth IRA setup for all the same reasons that attracted you to it in the first place.
In this case, you might “reconvert” your IRA. In other words, you can convert your recharacterized traditional IRA back into a Roth IRA. This is essentially treated as a new conversion for tax purposes.
With a Roth IRA in existence at least five years, qualified distributions are completely exempt from federal income tax. A qualified distribution is one that is paid after reaching age 59 1/2, received on account of death or disability or used for first-time homebuyer expenses (up to a lifetime limit of $10,000). In contrast, traditional IRA distributions are taxed at ordinary income rates as high as 35% — probably even higher in future years.
However, the IRS doesn’t allow you to keep flip-flopping back and forth between the two types of IRAs. You must meet specific time restrictions for a reconversion. Specifically, a traditional IRA can’t be reconverted to a Roth before the later of:
1. The beginning of the tax year following the tax year of the conversion
2. The end of the 30-day period beginning on the day of the recharacterization.
This rule applies regardless of whether the recharacterization falls into the year of the conversion or the following year.
This is an important decision for taxpayers rapidly approaching retirement. We can help you analyze your personal needs. Call us to arrange a consultation.
Dependent Health Coverage
Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27
As a result of changes made by the recently enacted Affordable Care Act, health coverage provided for an employee’s children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010.
The Internal Revenue Service announced today that these changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit.
“These changes give employers a unique opportunity to offer a worthwhile benefit to their employees,” IRS Commissioner Doug Shulman said. “We want to make it as easy as possible for employers to quickly implement this change and extend health coverage on a tax-favored basis to older children of their employees.”
This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.
Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.
The notice says that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.
In addition to changing the tax rules as described above, the Affordable Care Act also requires plans that provide dependent coverage of children to continue to make the coverage available for an adult child until the child turns age 26. The extended coverage must be provided not later than plan years beginning on or after Sept. 23, 2010. The favorable tax treatment described applies to that extended coverage.
Washington Reforms Health Care And Taxes
Sunday’s night’s health care bill will go down as one of those once-in-a-generation accomplishments. I’m not here to debate the merits of the bill – historians will still be doing that decades from now. But it’s important to point out some important tax changes included in the bill and the companion “reconciliation” bill now before the Senate. (Just how important are they? Well, the Congressional Budget Office says the IRS will need $10 billion and 17,000 new employees to enforce its share of the new rules!)
Here are some of the key tax provisions:
- Starting immediately, certain small businesses with less than 10 employees will get a 35% credit for the cost of providing employee health benefits.
- Starting in 2011, employers will have to report the value of health benefits on Form W2.
- The penalty tax for Health Savings Account distributions not used for health care expenses doubles from 10% to 20%. This will discourage using HSAs for supplemental retirement savings.
- Starting in 2013, the 7.5% floor for deducting medical and dental expenses climbs to 10% (unless you or your spouse are 65 or older, in which case it remains at 7.5% until 2016).
- Healthcare flexible spending account contributions are capped at $2,500 per year.
- Starting in 2014, businesses with more than 50 employees will have to offer heath benefits or pay a penalty of $750/employee.
The reconciliation bill includes one more unwelcome surprise. Currently, the Medicare tax is limited to 2.9% of earned income. The reconciliation bill imposes an additional Medicare tax of 0.9% on earned income above $200,000 (individuals) or $250,000 (families). It also adds a 3.8% “Unearned Income Medicare Contribution” on investment income – specifically, interest, dividends, annuities, royalties, capital gains, and rents – for taxpayers with Adjusted Gross Income above those same thresholds. Those new levies would take effect in 2013.
The complete bill is 1,018 pages, so it’s going to take some time to analyze. But we’ll be paying close attention as details become available. In the meantime, call us with any questions!
What documents are acceptable as proof of identity and foreign status?
There are now 13 acceptable documents the IRS will accept as proof of identity.
An original, or a certified or notarized copy, of an UNEXPIRED passport is the only document that is accepted for both identity and foreign status. If you do not have a passport, you must provide a combination of current documents that contain expiration dates – we accept documents issued within 12 months of an application if no expiration date is normally available. The documents must also show your name and photograph, and support your claim of foreign status.
IRS will accept certified or notarized copies of a combination (two or more) of the following documents, in lieu of a passport:
-
National identification card (must show photo, name, current address, date of birth, and expiration date)
-
U.S. driver’s license
-
Civil birth certificate (required for dependents under 18 years old)
-
Foreign driver’s license
-
U.S. state identification card
-
Foreign voter’s registration card
-
U.S. military identification card
-
Foreign military identification card
-
Visa
-
U.S. Citizenship and Immigration Services (USCIS) photo identification
-
Medical records (dependents – under 14, under 18 if a student)
-
School records (dependents – under 14, under age 18 if a student)
How do I make sure my tax return is received by the IRS?
The tax court has ruled that a tax return is not considered timely filed if it is lost by the U.S. Postal Service and it was not sent by registered or certified mail. In order to avoid the risk of your return being lost in the mail, and therefore, treated as not received by the IRS, you should mail the return via certified mail, return receipts requested. Save the receipt, and you will be presumed to have timely filed your return – even if it is not received by the IRS.
Sec. 7502. Timely mailing treated as timely filing and paying states the following:
(a) General rule
(1) Date of delivery
If any return, claim, statement, or other document required to be filed, or any payment required to be made, within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed, or to which such payment is required to bemade, the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document, or payment, is mailed shall be deemed to be the date of delivery or the date of payment, as the case may be.
(2) Mailing requirements
This subsection shall apply only if–
(A) the postmark date falls within the prescribed period or on or before the prescribed date–
(i) for the filing (including any extension granted for such filing) of the return, claim, statement, or other document, or
(ii) for making the payment (including any extension granted for making such payment), and
(B) the return, claim, statement, or other document, or payment was, within the time prescribed in subparagraph (A), deposited in the mail in the United States in an envelope or other appropriate wrapper, postage prepaid, properly addressed to the agency, officer, or office with which the return, claim, statement, or other document is required to be filed, or to which such payment is required to be made.
(b) Postmarks
This section shall apply in the case of postmarks not made by the United States Postal Service only if and to the extent provided by regulations prescribed by the Secretary.
(c) Registered and certified mailing; electronic filing
(1) Registered mail
For purposes of this section, if any return, claim, statement, or other document, or payment, is sent by United States registered mail–
(A) such registration shall be prima facie evidence that the return, claim, statement, or other document was delivered to the agency, officer, or office to which addressed; and
(B) the date of registration shall be deemed the postmark date.
(2) Certified mail; electronic filing The Secretary is authorized to provide by regulations the extent to which the provisions of paragraph (1) with respect to prima facie evidence of delivery and the postmark date shall apply to certified mail and electronic filing.
(d) Exceptions
This section shall not apply with respect to–
(1) the filing of a document in, or the making of a payment to, any court other than the Tax Court,
(2) currency or other medium of payment unless actually received and accounted for, or
(3) returns, claims, statements, or other documents, or payments, which are required under any provision of the internal revenue laws or the regulations thereunder to be delivered by any method other than by mailing.
Plug-In Electric Vehicle Credit (IRC 30 and IRC 30D)
Qualified Plug-in Electric Drive Motor Vehicles (IRC 30D)
Internal Revenue Code Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks. Some low speed vehicles may qualify for the credit if acquired prior to January 1, 2010. The amount of the credit for 2009 is equal to the sum of $ 2,500 plus $ 417 for each kilowatt-hour of traction battery capacity in excess of four kilowatt-hours. The maximum credit can range from $ 7,500 to $ 15,000, depending on the gross vehicle weight rating of the vehicle. For vehicles acquired after 12/31/2009, the maximum amount of the credit will be $7,500 and the 30D credit will no longer apply to low speed vehicles. However, the credit under section 30, discussed below, applies to certain low speed vehicles acquired after 12/31/2009. The vehicle must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States.
Section 30D originally was enacted in the Energy Improvement and Extension Act of 2008. The American Recovery and Reinvestment Act of 2009 amended section 30D effective for vehicles acquired after December 31, 2009. For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law. The list of qualified vehicles provided below applies only to vehicles acquired by December 31, 2009.
Notice 2009-54 provides procedures that a vehicle manufacturer may use if it chooses to certify that a vehicle meets certain requirements that must be satisfied to claim the new Qualified Plug-in Electric Drive Motor Vehicle Credit and the amount of the credit allowable with respect to that vehicle. Notice 2009-54 applies to vehicles acquired by December 31, 2009.
Notice 2009-89 applies to vehicles acquired subsequent to 12-31-2009 and provides procedures that a vehicle manufacturer may use if it chooses to certify that a vehicle meets certain requirements that must be satisfied to claim the Qualified Plug-in Electric Drive Motor Vehicle Credit and the amount of the credit allowable with respect to that vehicle
Plug-in Electric Vehicles (IRC 30)
Internal Revenue Code Section 30 provides a credit for qualified plug-in electric vehicles. The credit is equal to 10 percent of the cost of a qualified plug-in electric vehicle and is limited to $2,500. Qualified vehicles may include low-speed vehicles or vehicles that have two or three wheels.
Vehicles must be acquired after February 17, 2009, and before January 1, 2012. The vehicle must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States.
Notice 2009-58 provides procedures for a vehicle manufacturer to certify to the Internal Revenue Service that a vehicle of a particular make, model, and model year meets the requirements that must be satisfied to claim the new plug-in electric vehicle credit under § 30.
How to Choose a Tax Return Preparer and Avoid Preparer Fraud
Taxpayers who decide they need assistance when preparing a tax return should choose a tax preparer with care and caution. Even if a return was prepared by an outside individual or firm, taxpayers should remember that they are legally responsible for what they file with the Internal Revenue Service.
Most return preparers are professional, honest and provide excellent service to their clients, but some engage in fraud and other illegal activities. Return preparer fraud involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients.
Preparers may, for example, manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit. In some situations, the client, or taxpayer, may not even know of the false expenses, deductions, exemptions and/or credits shown on his or her tax return.
However, when the IRS detects a fraudulent return, the taxpayer — not the return preparer — must pay the additional taxes and interest and may be subject to penalties.
The IRS Return Preparer Program focuses on enhancing compliance in the return-preparer community by investigating and referring criminal activity by return preparers to the Department of Justice for prosecution. The IRS can also assert appropriate civil penalties against unscrupulous return preparers.
Also to combat fraud, IRS Commissioner Doug Shulman recently made a series of recommendations with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.
While most preparers provide honest service to their clients, the IRS urges taxpayers to be careful when choosing a preparer –– as careful as they would be choosing a doctor or lawyer. Even if someone else prepares a tax return, the taxpayer is ultimately responsible for all the information on the return. For that reason, taxpayers should never sign a blank tax form. And they should review the return before signing it and ask questions on entries they don’t understand.
Helpful Hints When Choosing a Return Preparer
- Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
- Avoid preparers who base their fee on a percentage of the refund.Use a reputable tax professional who signs the tax return and provides a copy.
- Consider whether the individual or firm will be around to answer questions about the preparation of the tax return months, or even years, after the return has been filed.
- Check the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
- Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
Reputable preparers will ask to see receipts and will ask multiple questions to determine whether expenses, deductions and other items qualify. By doing so, they are trying to help their clients avoid penalties, interest or additional taxes that could result from an IRS examination.
Tax evasion is a risky crime, a felony, punishable by five years imprisonment and a $250,000 fine.
Reporting Suspected Tax Fraud Activity
Tax fraud or abusive return preparers can be reported to the IRS on Form 3949-A, Information Referral. This form is available as a download from the IRS Web site at IRS.gov or by calling (800) 829-3676 to order by mail. The completed form, or a letter detailing the alleged fraudulent activity, should be sent to Internal Revenue Service, Fresno, CA 93888.
The mailing should contain specific information about the individual or business, the activity, when the alleged violation took place, the amount of money involved, how the reporter became aware of it and any other information that might be helpful to an investigation. The identity of the person filing the report is not required but it could be helpful in an investigation and it can be kept confidential.
Rewards based on the amount of additional tax, penalties and interest owed can be made to individuals who report fraud. IRS Form 211, Application for Award for Original Information, can be used to claim a reward.
The IRS’ Whistleblower Office will make the final decision about whether an award will be paid and for how much. Award amounts are based on the value of the information you provided compared with the amount of additional tax, penalties and interest collected by the IRS.
Check Withholding to Avoid a Tax Surprise
With 2009 nearly half over, the Internal Revenue Service reminds individual taxpayers there is no better time to check their 2009 federal income tax withholding levels to make sure they do not face any surprises when returns are due next spring.
The Making Work Pay Credit lowered tax withholding rates this year for 120 million American households. However, particular taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is withheld: multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers and pensioners.
Failure to adjust your withholding could result in potentially smaller refunds or may cause you to owe tax rather than receive a refund next year. So far in 2009, the average refund amount is $2,675 and 79 percent of all returns received a refund.
Because retirees typically have withholding from their pension payments, pension plan administrators or pension payors should be aware of the optional adjustment procedure for pension withholding announced in Notice 1036-P, Additional Withholding for Pensions for 2009.
Social security beneficiaries, supplemental security income recipients, disabled veterans and railroad retirees that receive this year’s one-time $250 economic recovery payment should be aware that the Making Work Pay credit will be reduced by the $250 payment amount. They may also want to review their withholding.
The IRS withholding calculator on IRS.gov can help a taxpayer compute the proper tax withholding. The worksheets in Publication 919, How Do I Adjust My Withholding?, can also be used to do the calculation. If the result suggests an adjustment is necessary, the taxpayer should submit a new Form W-4, Withholding Allowance Certificate, to his or her employer or adjust the amount of quarterly tax paid.
In addition, the IRS reminds unemployed workers that the first $2,400 of unemployment benefits they receive during 2009 are tax-free for federal income tax purposes. People who expect to receive more than that should consider having tax withheld from their benefit payments in excess of $2,400. Use Form W-4V, Voluntary Withholding Request, or the equivalent form provided by the payer to request withholding to begin or end.
If you have additional questions or concerns please contact me at 562-868-6333 or email emil@mycpaweb.com and we will be glad to assist you.
Taxpayers should visit IRS.gov for more information about how to adjust federal income tax withholding. The Web site also has details on various tax incentives in the American Recovery and Reinvestment Act as well as downloadable forms and publications. Free tax forms and publications are also available by calling 1-800-TAX-FORM (1-800-829-3676).
