Examinations, Appeals, Collections, and Refunds

Examinations (Audits)

The Internal Revenue Service (IRS) accept most taxpayers’ returns as fi­led. If they inquire about your return or select it for examination, it does not suggest that you are dishonest. The inquiry or examination may or may not result in more tax. they may close your case without change; or you may receive a refund.

The process of selecting a return for examination usually begins in one of two ways:

First: they use computer programs to identify returns that may have incorrect amounts. These programs may be based on information returns, such as Forms 1099 and W-2, on studies of past examinations, or on certain issues identified by compliance projects.

Second: they use information from outside sources that indicates that a return may have incorrect amounts. These sources may include newspapers, public records, and individuals. If we determine that the information is accurate and reliable, we may use it to select a return for examination.

Publication 556: Examination of Returns, Appeal Rights, and Claims for Refund, explains the rules and procedures that they follow in examinations.

The following sections give an overview of how they conduct examinations.

By Mail

They handle many examinations and inquiries by mail. They will send you a letter with either a request for more information or a reason why they believe a change to your return may be needed. You can respond by mail or you can request a personal interview with an examiner. If you mail them the requested information or provide an explanation, they may or may not agree with you, and they will explain the reasons for any changes. Should do not hesitate to write to them about anything you do not understand.

By Interview

If they notify you that we will conduct your examination through a personal interview, or you request such an interview, you have the right to ask that the examination take place at a reasonable time and place that is convenient for both you and the IRS. If the examiner proposes any changes to your return, he or she will explain the reasons for the changes. If you do not agree with these changes, you can meet with the examiner’s supervisor.

Repeat Examinations

If they examined your return for the same items in either of the 2 previous years and proposed no change to your tax liability, you should contact them as soon as possible so they can see if they should discontinue the examination.

Appeals

If you do not agree with the examiner’s proposed changes, you can appeal them to the Appeals Of­fice of the IRS. Most differences can be settled without expensive and time-consuming court trials. Your appeal rights are explained in detail in both Publication 5: Your Appeal Rights and How To Prepare a Protest If You Don’t Agree, and Publication 55: Examination of Returns, Appeal Rights, and Claims for Refund.

If you do not wish to use the Appeals Offi­ce or disagree with its ­findings, you may be able to take your case to the U.S. Tax Court, U.S. Court of Federal Claims, or the U.S. District Court where you live. If you take your case to court, the IRS would have the burden of proving certain facts if you kept adequate records to show your tax liability, cooperated with the IRS, and meet certain other conditions. If the court agrees with you on most issues in your case and ­founds that their position was largely unjustified, you may be able to recover some of your administrative and litigation costs. You will not be eligible to recover these costs unless you tried to resolve your case administratively, including going through the appeals system, and you gave them the information necessary to resolve the case.

Collections

Publication 594: The IRS Collection Process, explains your rights and responsibilities regarding payment of federal taxes. It describes:

  • What to do when you owe taxes. It describes what to do if you get a tax bill and what to do if you think your bill is wrong. It also covers making installment payments, delaying collection action, and submitting an offer in compromise.
  • IRS collection actions. It covers liens, releasing a lien, levies, releasing a levy, seizures and sales, and release of property.
  • IRS certification to the State Department of a seriously delinquent tax debt, which will generally result in denial of a passport application and may lead to revocation of a passport.

Your collection appeal rights are explained in detail in Publication 1660: Collection Appeal Rights.

Innocent Spouse Relief

Generally, both you and your spouse are each responsible for paying the full amount of tax, interest, and penalties due on your joint return. However, if you qualify for innocent spouse relief, you may be relieved of part or all the joint liability. To request relief, you must fi­le Form 8857: Request for Innocent Spouse Relief. For more information on innocent spouse relief, see Publication 971: Innocent Spouse Relief, and Form 8857.

Potential Third-Party Contacts

Generally, the IRS will deal directly with you or your duly authorized representative. However, they sometimes talk with other persons if they need information that you have been unable to provide, or to verify information they have received. If they do contact other persons, such as a neighbor, bank, employer, or employees, they will generally need to tell them limited information, such as your name. The law prohibits them from disclosing any more information than is necessary to obtain or verify the information they are seeking. Their need to contact other persons may continue if there is activity in your case. If they do contact other persons, you have a right to request a list of those contacted. Your request can be made by telephone, in writing, or during a personal interview.

Refunds

You may fi­le a claim for refund if you think you paid too much tax. You must generally ­file the claim within 3 years from the date you fi­led your original return or 2 years from the date you paid the tax, whichever is later. The law generally provides for interest on your refund if it is not paid within 45 days of the date you ­led your return or claim for refund. Publication 556: Examination of Returns, Appeal Rights, and Claims for Refund, has more information on refunds.

If you were due a refund but you did not fi­le a return, you generally must ­file your return within 3 years from the date the return was due (including extensions) to get that refund.

Taxpayer Advocate Service

Taxpayer Advocate Service is an independent organization within the IRS that can help protect your taxpayer rights. They can offer you help if your tax problem is causing a hardship, or you have tried but have not been able to resolve your problem with the IRS. If you qualify for their assistance, which is always free, they will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.

Tax Information

The IRS provides the following sources for forms, publications, and additional information.

  • Tax Questions: 1-800-829-1040 (1-800-829-4059 for TTY/TDD)
  • Forms and Publications: 1-800-829-3676 (1-800-829-4059 for TTY/TDD)
  • Internet: www.irs.gov
  • Small Business Ombudsman: A small business entity can participate in the regulatory process and comment on enforcement actions of the IRS by calling 1-888-REG-FAIR.
  • Treasury Inspector General for Tax Administration: You can confidentially (anonymously) report misconduct, waste, fraud, or abuse by an IRS employee by calling 1-800-366-4484 (1-800-877-8339 for TTY/TDD).