IRS Updates Rules for Fighting Tax Disputes Through Appeals
Published Date: 1/15/2025
Rule
Summary
Starting February 14, 2025, taxpayers can use the IRS Independent Office of Appeals to settle tax disputes more fairly and clearly, thanks to new rules from the Taxpayer First Act. These rules explain who can ask for help, when, and how the process works—making it easier to avoid court battles and save time and money. If you’re dealing with a tax disagreement, these changes could help you get a smoother, quicker resolution.
Analyzed Economic Effects
11 provisions identified: 3 benefits, 6 costs, 2 mixed.
Appeals Generally Available, With Exceptions
The IRS Independent Office of Appeals is generally available to all taxpayers to resolve Federal tax controversies under section 7803(e), but the final regulations list specific exceptions where Appeals consideration is not available. The rule affirms Appeals' mission to resolve disputes "without litigation" while keeping narrowly tailored exceptions.
Broader Definition of Tax Controversy
The regulations broaden the definition of a "Federal tax controversy" to include IRS administrative determinations about tax-exempt organizations, private foundations, qualified employee plans, and tax-exempt or tax-advantaged bond status. If you represent or run such an organization, those determinations may now be considered by Appeals.
Procedural and Timing Requirements to Use Appeals
Before Appeals will consider a dispute, the originating IRS office must have completed its review, you must submit the Appeals request in the prescribed time and manner, and Appeals must have sufficient time remaining on the applicable limitations period. Generally, a taxpayer will have only one opportunity for Appeals consideration.
No Appeals for Frivolous Positions or Related Penalties
Appeals consideration is not available for IRS determinations that reject a frivolous position or for penalties assessed under sections 6702 or 6682 for frivolous submissions or false information. Taxpayers labeled frivolous cannot obtain Appeals review of that determination or the related penalty under these rules.
Returned or Rejected Offers in Compromise Not Appealable
If the IRS erroneously returns or rejects an Offer in Compromise (OIC) as nonprocessable, Appeals consideration is not available to treat the OIC as accepted under section 7122(f). Appeals will not review such returned or rejected OICs.
Constitutional Challenges Not Reviewed by Appeals
Appeals will not consider taxpayer arguments that a statute is unconstitutional unless there is an "unreviewable decision" from a Federal court holding the cited statute unconstitutional. Appeals can consider other non-constitutional arguments about how a statute applies.
Effective and Applicability Dates
The final regulations take effect on January 15, 2025, and the rules in Sec. 301.7803-2 and 301.7803-3 apply to Appeals requests received on or after February 14, 2025. If you request Appeals consideration on or after February 14, 2025, these rules govern whether Appeals will consider your dispute.
FOIA Determinations Eligible for Appeals
The final regulations treat certain Freedom of Information Act (FOIA) disputes about IRS administrative determinations as matters that may be considered by Appeals. If you requested IRS records under FOIA, Appeals can be an option to seek consideration of related administrative determinations.
Whistleblower Award Decisions Excluded
Determinations under section 7623 about whistleblower awards are excluded from Appeals consideration. Appeals will not review whether a whistleblower is entitled to an award under section 7623.
No Appeals for Passport Certification Notices
Appeals consideration is not available for certification or notice of certification of a seriously delinquent tax debt to the State Department under section 7345. The taxpayer receives Notice CP508C and is instructed to contact the IRS number in the notice to request reversal if erroneous.
Special Rules for Docketed Tax Court Cases
For docketed Tax Court matters, Appeals may, in some circumstances, request that Chief Counsel return a case to Appeals for full consideration of issues when Appeals did not fully consider them before issuing a notice due to an impending statute of limitations. Appeals and Chief Counsel may also determine how settlement authority is transferred between offices.
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