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The IRS Appeals Office – Tax Authorities



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The IRS Independent Office of Appeals (“IRS Appeals”)
was established to provide an “independent” IRS function
that is separate and independent from the IRS’s compliance
functions that maintain responsibility for collecting and assessing
taxes. By statute, its function is to resolve tax controversies
without litigation on a basis that: (1) is fair and impartial to
both the IRS and the taxpayer; (2) promotes a consistent
application and interpretation of, and voluntary compliance with,
federal tax laws; and (3) enhances public confidence in the
integrity and efficiency of IRS.

IRS Appeals has been around—by one name or
another—for almost a century. Section 1001 of the 2019
Taxpayer First Act renamed the IRS Office of Appeals to the IRS
Independent Office of Appeals. But most of its operations remained
the same.

IRS Appeals plays an important role in the IRS’s overall
structure. Indeed, it resolves more than 100,000 tax cases every
year. Perhaps the two most common avenues for such resolutions are
Collection Due Process Hearings and appeals
pursuant to the Collection Appeals Program.

The Origins of the Current IRS Appeals

The IRS appeals function traces back to the 1920s, when it was
technically an offshoot of the predecessor to the Tax Court. Over
time, it took on new organizational structures — taking on
the monikers of the Technical Staff and Appellate Division, and
even becoming a division of Counsel — but always played a
pivotal role addressing tax disputes in the “gray.”

The Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. No. 105–206, 112 Stat. 685 (RRA), required that
the Commissioner develop and implement a plan to reorganize the
IRS. The RRA specifically directed the Commissioner to “ensure
an independent appeals function within the Internal Revenue
Service, including the prohibition . . . of ex parte communications
between appeals officers and other Internal Revenue Service
employees to the extent that such communications appear to
compromise the independence of the appeals officers.”

Prohibition on Ex parte Communications

Appeals fosters its independence through a policy that prohibits
certain ex parte communications with the IRS Collection office or
other IRS offices. Independence is one of Appeals’ most
important core values; the RRA therefore prohibits ex parte
communications “to the extent that such communications appear
to compromise the independence of the appeals officers.”

An “ex parte communication” is a communication that
takes place between any Appeals employee (e.g., Appeals Officers,
Settlement Officers, Appeals Team Case Leaders, Appeals Tax
Computation Specialists) and employees of other IRS functions
without the taxpayer/representative being given an opportunity to
participate in the communication. The term includes all forms of
communication, oral or written.

Collection Due Process Hearings

Collection Due Process (CDP) hearings are among the most common
proceedings in IRS appeals. A CDP hearing is available where a
taxpayer receives one of the following notices:

  • Notice of Federal Tax Lien Filing and Your Right to a
    Hearing under IRC 6320

  • Final Notice – Notice of Intent to Levy and Notice of
    Your Right to a Hearing

  • Notice of Jeopardy Levy and Right of Appeal

  • Notice of Levy on Your State Tax Refund – Notice of
    Your Right to a Hearing

  • Post Levy Collection Due Process (CDP) Notice

By law, a taxpayer has the right to a CDP hearing when they
receive a notice advising of this right and they timely file a
request for a hearing to the address indicated on the Notice.
Taxpayers are, however, limited to one hearing under section 6320 (Notice and opportunity for
hearing upon filing of notice of lien) and 6330 (Notice and opportunity for hearing
before levy) for each tax assessment within a tax period.

CDP determinations may be challenged in the United States Tax
Court.

Taxpayers who do not satisfy the 30-day time period to file a
timely CDP hearing request may nonetheless be entitled to an
“equivalent” hearing.

The Collection Appeals Program (“CAP”)

A taxpayer who disagrees with a lien, levy, seizure or a denial,
modification or termination of an installment agreement may be
entitled to a so-called “CAP” appeal with IRS
Appeals.

The Collection Appeals Program (CAP) is available for the
following IRS actions:

  • Before or after the IRS files a Notice of Federal Tax
    Lien

  • Before or after the IRS levies or seizes your
    property

  • Termination, or proposed termination, of an installment
    agreement ” Rejection of an installment agreement

  • Modification, or proposed modification, of an installment
    agreement

A CAP appeal is typically quicker, resulting in a faster Appeals
decision, and is available for a broader range of collection
actions than a CDP hearing. However, a CAP appeal does not provide
the right to challenge the outcome in court.

Types of IRS Appeals Cases

IRS Appeals handles a variety of cases. The primary categories
are listed below:

  • Collection Due Process (CDP) is a
    case where a taxpayer requests a hearing with an independent
    Appeals Settlement Officer in response to a notice of Federal tax
    lien or notice of intent to levy.

  • An Offer in Compromise (OIC) is an
    agreement between a taxpayer and the federal government that
    settles a tax liability for payment of less than the full amount
    owed. If the IRS rejected a taxpayer’s offer, the taxpayer may
    request that Appeals review and decide whether the offer should be
    accepted.

  • An Innocent Spouse (INNSP) case in
    Appeals is one in which the taxpayer requested and was denied
    innocent spouse relief by the IRS or when the non-requesting spouse
    disagrees with IRS determination to grant innocent spouse relief to
    the spouse requesting relief. An Innocent Spouse is a taxpayer who
    filed a joint return with a spouse or ex-spouse and may apply for
    relief of tax, interest and penalties if he/she meets specific
    requirements.

  • A Penalty Appeals (PENAP) case is one in which
    the taxpayer requests abatement of a civil penalty that was
    assessed before the taxpayer was given an opportunity to dispute
    the penalty. The taxpayer may submit a written request for
    abatement of the penalty, and if the request is denied, the
    taxpayer may appeal.

  • A Coordinated Industry Case (CIC) designation
    may be assigned to a large corporate taxpayer based on factors such
    as the taxpayer’s gross assets, gross receipts, operating
    entities, industries and/or foreign assets. A CIC taxpayer may
    appeal the findings of an examination conducted by the IRS.

  • An Industry Case (IC) is any type of large
    corporate taxpayer, Large Business & International, case that
    is not designated as a Coordinated Industry Case (CIC). An Industry
    Case taxpayer may appeal the findings of an examination conducted
    by the IRS.

  • An Examination (EXAM) case in Appeals involves
    issues in dispute by the taxpayer relating to income tax,
    employment tax, excise tax, estate tax, gift tax or tax-exempt
    status. The cases generally involve appeals by individuals or small
    business of a determination by the IRS.

  • Cases Docketed with the U.S. Tax Court.

  • Other category — Includes cases
    considered by Appeals involving issues related to Abatement of
    Interest, Collection Appeals Program, Office of Professional
    Responsibility, Freedom of Information Act, Trust Fund Recovery Penalty, Collection Due
    Process Timeliness Determination and other miscellaneous
    penalties.

Taxpayers and professionals preparing for hearings before IRS
Appeals may find the following resources useful:

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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