I am a former IRS agent and teaching instructor. I have over 40 years of experience with the Internal Revenue Service and in private practice.

As a general rule of practice after 40 years of tax experience I have found I get a better result going to the appeals division.

I feel that you have a more seasoned person looking at the case who is much more able to settle the case based on their years of experience.

Many time in the local office you do not know what you’re going to get from the field agent working the case. It is a lot easier many times to convince the appeals officer based on certain common senses.

Many times a local office will see things black-and-white and the appeals agent sees things in the gray and are quicker to settle cases. The local offices seem to be more hard-nosed sticking to the facts, having little diverse city or settlement authority.

But keep in mind, you cannot have any frivolous arguments, you must have some sort of case before bringing it forward.

If you work a lot of cases that frequently go to appeals you can start building a reputation of a solid practitioner versus a scammer. It is best generally for your client and for your reputation to send solid work to the appeals office.

The appeals agent does something that the local agent in the office cannot do. If cases cannot be settled at the Appellate Division they go to Tax Court and IRS does not want to have the cost and expense of going to Tax Court so the appellate agent does their best job to settle the case at that level.

The appeals agent findings are very important and much of this is based around hazards of litigation, that is, is it easier to settle the case then go to Tax Court and lose.

Here is a look at the hazards of litigation.

A LAYMAN LOOK AT THE HAZARDS PROCESS

I am attempting here to lay out a layman’s look at the hazards of litigation and what the appellate officer will look at as a case comes their way.

As a general rule, the appellate officer receives the entire case from the collection division or the audit division with all the notes and the entire case file.

Generally, the Appellate Division will get involved in the case from the audit or collection division in which the taxpayer is unsatisfied based on the result of the current field agent working the case and asked for a hearing in the appeals division.

The agent will carefully look at the case and then send out their appointment letter. They want to try to understand the case first before the appointment letters go out.

It is critically important for the practitioner of the taxpayer to respectfully and respond to all-time dated requests. You not want to do anything to upset the appeals agent and their timelines in the handling of these cases.

Case files sent by the practitioner to appeals should be very organized, well documented and placed in tabs if necessary. Good case appearance is very important to the appellate agent can make their way through the case easily.

IRS management is very time conscious on cases and as a general rule, they do not like having overage cases in their inventory and many times both management and the agents are written up because of poor time management.

The appeals division is there to make a lasting final decision before the case could go to Tax Court.

The appeal officer does not want the case to go to court and they do their best to settle the case if in fact it can be settled on a reasonable basis and leaning toward the side of the United States government however there are certain factors that the IRS appellate agent must consider before settlement.

If the case goes the Tax Court the IRS does not want to lose because it can alter future decisions and this can have a devastating effect on future cases going for. if they lose the case it looks bad on the appellate agent, the supervisor’s management and the district in which the decision was ruled.

An Example:

The appellate agent looks at the case and based on the facts and circumstances they feel they have an 8/10 chance of winning the case, many times they can offer an 80% reduction in the total tax. Before the agent sends out a letter offering a reduction the case is reviewed with their supervisor to make sure this is consistent with the IRS overall goal so it does not affect future cases.

The IRS has certain categories or criteria that they use for the hazards of litigation.

I have put together 11 elements that they use in making their determination about the strength of the weakness of their case. Please remember this is a layman’s view so those reading this blog can understand how the IRS works these hazards of litigation cases.

I have deliberately not gone into any legal detail because this is just a brief overview of hazards.

Hazards of litigation categories

This list contains a majority of factors but not all-encompassing.

1. How would the judge view the facts of this case.

2. How much evidence would this hold inside a courtroom,

3. What is the credibility of the representation and the taxpayer

4. How well is the case been presented to the appeals agent that will be presented in court. Is the case well presented in well representative

5. Can the taxpayer meet the burden of proof effectively to convince the judge

6. If witnesses come into play are they credible and will they testify in such a case, can anything disqualify them

7. Has the taxpayer successfully shifted the burden of proof to IRS

8. Who does the appeals agent based on the aforementioned facts feel the judge will rule in favor of

9. How solid will the presenter of the taxpayer’s case be

10. Can the evidence of the facts be proven

11. Has tax law already existed in this case

What Does the IRM say about these matters

1. 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 Service.

This is Appeals’ general contribution towards achieving the Service mission. (See IRM 1.1.1, IRS Mission and Basic Organization and IRM 1.2.17, Servicewide Policies and Authorities, Policy Statements for the Appeals Process.) In further support of the Service mission, Appeals may defer action on or decline to settle some cases, under Policy Statement 8–47 (described at IRM 1.2.17.1.6), where:

A. required by other Headquarters Office-issued internal management documents, such as those suspending action on cases or those requiring coordination or control of identified matters with widespread impact; or

B. such action would produce a greater positive effect on voluntary compliance than would be derived from settlement or other action on the case.

3. A fair and impartial resolution is one which reflects on an issue-by-issue basis the probable result in event of litigation or one which reflects mutual concessions for the purpose of settlement based on relative strength of the opposing positions where there is substantial uncertainty of the result in event of litigation.

4. It is the experience of Appeals that thorough, reasonable, and objective consideration of all elements of a controversy leads, in a large majority of cases, to the resolution of the controversy on a basis agreeable to both the taxpayer and the Government.

The agreement is not possible in all cases, however, a taxpayer may not agree with Appeals conclusion as to the probable result in event of litigation or to the extent of mutual concessions required where there is substantial uncertainty of litigating result or may prefer to litigate for other reasons.

Former IRS Appellate Agents + IRS Help For Appeals Cases + We know the system