What You Need to Know About IRS Publication 1660 and Appeal Rights

Dealing with tax disputes can be overwhelming, especially if you’re unsure about your rights. The IRS provides guidelines on how to challenge certain decisions through Publication 1660, which explains the appeal process for taxpayers facing audits, penalties, or collection actions. Understanding these rights ensures fair treatment and may reduce financial burdens.

If you disagree with an IRS decision, knowing how to properly file an appeal can significantly impact the outcome.

Key Points in the Latest Publication

The latest update to IRS Publication 1660 clarifies several aspects of the appeals process, particularly deadlines and taxpayer rights. One major change emphasizes the importance of submitting appeals on time. Taxpayers receiving a Notice of Deficiency generally have 90 days to file a petition with the U.S. Tax Court (150 days if outside the U.S.). Missing this deadline allows the IRS to proceed with collection actions.

Another update highlights the role of the IRS Independent Office of Appeals, which operates separately from the divisions that make initial determinations. Taxpayers can request a conference with an appeals officer in person, by phone, or via video conferencing, reducing the need for travel. The IRS has also expanded Fast Track Settlement, which can speed up resolutions for certain cases.

The publication provides additional guidance on how interest and penalties are handled. Interest continues to accrue while a penalty is under dispute, but if the IRS determines a penalty was applied incorrectly, the related interest may be reduced or eliminated. Taxpayers can also request penalty abatement under reasonable cause provisions, such as reliance on incorrect advice from a tax professional or circumstances beyond their control, like a natural disaster.

Who Qualifies to File an Appeal

Taxpayers who receive an official IRS notice regarding an adjustment, penalty, or collection action generally have the right to challenge the decision. The IRS Independent Office of Appeals reviews disputes involving tax assessments, installment agreements, offers in compromise, and certain collection actions. However, only cases based on tax law or factual evidence will be considered—arguments based on moral objections or general dissatisfaction with tax laws do not qualify.

Individuals, businesses, and tax-exempt organizations may file an appeal if they believe the IRS made an incorrect determination. For example, a small business owner assessed additional self-employment tax after an audit can challenge the decision by providing documentation proving the IRS calculations were incorrect. Similarly, a nonprofit that loses its tax-exempt status due to alleged noncompliance may appeal by demonstrating it met all filing and operational requirements.

Certain collection-related disputes also qualify, including lien filings, levies, and rejected installment agreements. If the IRS places a lien on a taxpayer’s property due to unpaid taxes, the individual can request a Collection Due Process (CDP) hearing to argue the lien was improperly filed or that alternative payment arrangements should be considered. If an installment agreement request is denied, the taxpayer can appeal by providing financial records showing they qualify for a modified payment plan.

Steps to Submit an Appeal

Once a taxpayer determines they qualify to challenge an IRS decision, they must complete the necessary forms, gather supporting documentation, and submit everything within the required timeframe.

Filing the Form

The required form depends on the type of appeal:

– Form 12203 (Request for Appeals Review) – Used for disputes related to audits or penalties.
– Form 12153 (Request for a Collection Due Process or Equivalent Hearing) – Required for appeals involving liens, levies, or other collection actions.
– Form 13711 (Request for Appeal of Offer in Compromise) – Used when disputing the rejection of an offer in compromise.

Taxpayers must clearly explain why they disagree with the IRS decision. Vague or incomplete responses can result in rejection. For example, if disputing an accuracy-related penalty, they should specify whether they are challenging the penalty due to reasonable cause and provide supporting evidence, such as documentation showing reliance on a tax professional’s advice. If a representative is handling the appeal, Form 2848 (Power of Attorney and Declaration of Representative) must also be included.

Assembling Documentation

Supporting evidence strengthens an appeal. Taxpayers should gather relevant records, such as tax returns, bank statements, receipts, contracts, and correspondence with the IRS. If disputing an audit adjustment, they must provide documentation substantiating reported income, deductions, or credits. If the IRS disallows a Schedule C business expense deduction, the taxpayer should submit invoices, payment records, and an explanation of how the expense qualifies under tax law.

For penalty disputes, taxpayers may need to demonstrate reasonable cause for noncompliance. If requesting penalty abatement due to a medical emergency, hospital records or doctor’s statements can serve as supporting evidence. If a taxpayer missed a filing deadline due to a natural disaster, they should reference IRS disaster relief notices, which often provide automatic extensions for affected areas.

Submitting Within Deadlines

Timeliness is critical when filing an appeal. Deadlines vary depending on the type of notice received:

– Notice of Deficiency (90-day letter) – Taxpayers have 90 days (or 150 days if outside the U.S.) to file a petition with the U.S. Tax Court.
– Collection Due Process (CDP) hearing requests – Must be submitted within 30 days of the notice date.

For informal appeals, such as disputing an audit adjustment before receiving a formal notice, taxpayers typically have 30 days to request an appeal after receiving an examination report. If additional time is needed, they may request an extension, though approval is not guaranteed. Appeals should be sent via certified mail with return receipt requested to provide proof of mailing.

Addressing Lien-Related Concerns

A federal tax lien establishes the government’s legal claim to a taxpayer’s property due to unpaid taxes. Unlike a levy, which involves asset seizure, a lien encumbers property—such as real estate, vehicles, and financial accounts—making it difficult to sell or refinance. Once the IRS files a Notice of Federal Tax Lien (NFTL) with local or state recording offices, it becomes a public record, potentially affecting credit and limiting access to financing.

Taxpayers seeking lien relief have several options:

– Lien withdrawal – Removes the NFTL from public records but does not eliminate the debt. Taxpayers may qualify if they enter a Direct Debit Installment Agreement (DDIA) for liabilities under $50,000 and demonstrate compliance.
– Lien discharge – Allows the sale of specific property free of the lien, provided the IRS receives proceeds equal to its interest.
– Lien subordination – Enables taxpayers to refinance or secure new loans by allowing another creditor to take priority over the IRS lien.
– Currently Not Collectible (CNC) status – Temporarily suspends enforcement actions if the taxpayer proves paying the debt would prevent them from covering basic living expenses.

Potential Outcomes

Once an appeal is submitted, the IRS reviews the case to determine whether to uphold, modify, or overturn its original decision. The outcome depends on the strength of the taxpayer’s argument, supporting documentation, and applicable tax laws.

If successful, the IRS may reduce or eliminate the disputed tax liability, remove penalties, or adjust collection actions. For example, if a taxpayer successfully argues that an accuracy-related penalty was improperly assessed, the IRS may remove the penalty and reduce the associated interest. In collection cases, a taxpayer may secure a more manageable installment agreement or have a lien withdrawn if they meet the necessary criteria.

If the appeal is denied, the taxpayer can request reconsideration, pursue mediation through IRS Alternative Dispute Resolution programs, or, in some cases, file a petition with the U.S. Tax Court. Understanding these potential outcomes helps taxpayers decide whether to proceed with an appeal or explore other resolution options.