Tax Law FAQ

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What are the options for resolving a case after an audit?

An audit (more properly known as a civil examination) can last a few months or can span a year or longer (depending upon the complexity of the taxpayer’s return, the taxpayer’s level of cooperation and the issues involved in the case). At the end of the audit, the IRS Revenue Agent will inform the taxpayer of the proposed changes to the taxpayer’s return by issuing a 30-day letter.

If the taxpayer agrees with the proposed changes, the taxpayer signs an agreement and pays any additional tax, interest and penalties that may be due. If the taxpayer does not agree, the taxpayer has the right to file a written protest to appeal the proposed changes to IRS Office of Appeals. At that point, an IRS Appeals Officer has jurisdiction over the case and will attempt to settle the case by taking into consideration the hazards of litigation for the government, if the case were to proceed to trial in Tax Court. IRS Appeals, however, will not settle a case based upon nuisance, and this means, to be successful, the taxpayer must demonstrate that hazards of litigation exist if the case proceeds to U.S. Tax Court. If a basis of settlement is not reached, the case proceeds to Tax Court.

If you are a taxpayer facing an audit, you should contact competent tax counsel, who can explain your options and develop a defensible solution.

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