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Show p Taxpayers Can Appeal Audits 1 Through IRS, Courts Or Both j-Probably fewer things : cause more discomfort than ;the prospect of an Internal : Revenue Service examination of your tax return and one of the most unsettling apprehensions is that the IRS holds all the cards; that you can only agree with the findings find-ings or make an ineffectual protest. OF COURSE, if your examination ends with no change or a refund to you (yes, believe it or not, some do), you'll probably think no more of it. But what if the IRS examiner proposes additional tax due and you disagree? Writing the check is not your only alternative; you have the right to appeal the examiner's finding within IRS and even through the federal courts or both. Suppose your examination takes place in an IRS office. You may be able to settle the disagreement immediately by explaining your position to the examiner's supervisor. That's your right. But if you and the IRS still can't agree, you have the choice of continuing con-tinuing your appeal through the IRS and, if needed, the federal courts, or you can go directly to the courts. MOST TAXPAYERS use the IRS system first. In 1977, for example 54,000 out of 62,000 disagreements were appealed through the IRS and most were settled there. Starting an appeal is not difficult. When you and the IRS disagree, the IRS will mail a copy of the examination examina-tion report explaining the proposed adjustments in your tax, and include a letter telling you of your right to appeal within 30 days. An agreement form and a copy of IRS Publication 5, "Appeal Rights and Preparation of Protests for Unagreed Cases" also will be provided. Follow the instructions in the letter. IF A written protest kis required (not necessary if the amount in dispute does not exceed $2,500 or if the examination is conducted as part of the Individual Office Examination program or by correspondence), you must make it within the 30-day period granted in the letter. And remember that you may, at any time, decide to agree with the examiner's findings by signing the waiver form provided. 1 If you have decided to use the IRS appeals system, an appeals officer in your particular par-ticular IRS region will arrange a conference with you at a convenient time and place. Conferences are conducted con-ducted on an informal basis, but you or your representative representa-tive should be prepared to discuss all disputed issues and present your views. Coming prepared will save the time and expense of more meetings. Chances are that you and the IRS will be able to reach an agreement here. INCIDENTALLY, the IRS instituted a new appeals system sys-tem in 1978 in which all taxpayers tax-payers disputing a tax question ques-tion would have a single administrative ad-ministrative hearing before an appeals officer, who acts independently of the district office. The hearing officer now has full authority to settle a case regardless of the doilar amount involved, taking into account such elements as the hazards of litigation. One of the benefits the IRS foresees from the new procedure is a greater degree of uniformity in decisions. BUT WHAT happens if the IRS appeals system does not work out? Your next step is the federal courts. You have the choice of taking your appeal to the U.S. Tax Court, the U.S. Court of Claims or a U.S. District Court. If you don't want to pay the tax before going to court use the Tax Court, since it hears only cases where taxes have not been assessed. ONCE YOU decide to go to Tax Court and you've received your examination report from the IRS, ask IRS to issue a Notice of Deficiency. That's basically a letter stating that you owe additional tax. You'll have 90-days from the date the notice no-tice is mailed to file a petition with the Tax Court (or, if you decide to settle, to pay the tax). It's important to act within 90-days; otherwise, the IRS will automatically assess the tax against you, taking your case out of the Tax Court's jurisdiction. IF YOU filed your petition on a timely basis, the Tax Court will schedule your case for trial at a location convenient to you. You may represent yourself before the Tax Court or you may be represented by anyone admitted ad-mitted to practice before that Court. Incidently, the Tax Court has a Small Case Procedure for disputes of $5,000 or less ' for any taxable year. If you choose this procedure, and if the Tax Court approves, you may represent yourself before the court. HOWEVER, UNDER the Small Case Procedure the decision of the Tax Court cannot be appealed, Information Informa-tion on the Small Case Procedure is available from the U.S. Tax Court, 400 Second St., N.W., Washington, Washing-ton, D.C. 20217. Generally, the District Courts and Court of Claims will hear your suit only after you have paid the disputed tax and filed for a refund. You choose which of these courts to petition. THE COURT of Claims is located in Washington, D.C. and cases before this court are decided by a judge. District Dis-trict Courts are located in every state, the District of Columbia and some territories, terri-tories, and you have the choice of a jury trial there. A claim for refund may be made by filing Form 1040X, "Amended U.S. Individual Income Tax Return," with the IRS Service Center where you mailed your original return. File a separate 1040X for each tax year involved and attach statements supporting your claims. REMEMBER though that Form 1040X must be filed within three years of the date of the original return, or two years from the date the tax was paid, whichever is later. If the IRS rejects your claim, or if they do not act on your claim within six months, you may then file suit for refund. But you must file your suit no later than two years after the IRS disallows your refund claim. YOU CAN obtain more detailed de-tailed information about filing a suit from the- clerk of your District Court, or from the clerk of the Court of Claims, 717 Madison Place, N.W., Washington, D.C. 20005. The IRS has a free publication explaining its appeals ap-peals process and your rights. Ask your local IRS office for Publication 556, "Examination "Examina-tion of Returns, Appeal Rights and Claims for Refund." Remember that at any IRS proceeding during this appeals ap-peals process, you have the right to represent yourself, or be represented by an attorney, attor-ney, a certified public accountant ac-countant or an individual enrolled to practice before the IRS. |