How to Fight Back When the IRS Gets It Wrong

The Liberty Team
May 10
3 min read

Updated: 6 hours ago

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How to Fight Back When the IRS Gets It Wrong...

International Taxation Experts — CPA Dallas-Fort Worth Metro Area

How to Fight Back When the IRS Gets It Wrong

If you receive an IRS audit report (usually called an Exam Report or Form 4549) and you disagree with the proposed changes, you have several important options and rights. First, you need to know that you DO NOT have to agree with the IRS. They get it wrong; a lot! In fact, we've saved our clients almost $2 million in taxes, penalties, and interest that the IRS was "wrong about."

So, when you've gone through an audit, and the IRS does issue that report (sometimes, they may refuse to be reasonable, in which case, you're probably better off taking your case to Appeals), here's what to do:

1. Review the Report Carefully

Understand the specific adjustments the IRS has "proposed."
Identify why you disagree (e.g., disallowed deductions, unreported income, etc.).
Gather supporting documentation (receipts, contracts, bank records) that support your position.

2. Do NOT Sign the Report If You Disagree

Signing Form 4549 means you agree with the findings and waives your right to appeal. Often times, the IRS does not tell you this in hopes that they can get you to agree to their findings (whether or not this tactic is ethical is a conversation for another day).
If you don’t agree, do not sign it—this preserves your rights to challenge their findings. As stated previously, you do not have to agree with the IRS. So many people don't know this and they sign the report thinking that acquiescence will just make it go away. Unfortunately, when dealing with the IRS, acquiescence only makes the aggressor more aggressive.

3. Request a Meeting With the Auditor or Supervisor

You can ask to speak with the auditor's manager for clarification or to attempt a resolution.
Be respectful and clear about why you disagree, providing evidence if possible.
Sometimes, this is fruitful. Other times, the manager or supervisor is driving the IRS' position.

4. Request an IRS Appeals Conference

If no agreement is reached with the IRS agent, request a review by the IRS Office of Appeals.
You typically need to submit a formal protest letter (if the amount at stake is over $25,000 per tax period).
Appeals officers are independent of IRS examiners and often settle disputes without going to court.
Again, so many taxpayers are unaware that they can appeal the IRS' audit findings. Most Appeals officers are reasonable individuals that are well versed in tax law, they understand accounting better, and they're just more pleasant to deal with. In other words, by and large, they don't have an axe to grind and don't try and punish innocent taxpayers like so many IRS agents do.

5. Wait for the Statutory Notice of Deficiency (if needed)

If you can’t resolve the matter with Appeals (or skip Appeals), the IRS may issue a Statutory Notice of Deficiency often called the 90 Day Letter.
This gives you 90 days to file a petition in U.S. Tax Court. You can often represent yourself in the Tax Court and explain your position.

Conclusion

At the end of the day, it's extremely important to remember that you do not have to agree with the IRS or their findings. You don't have to sign the audit report and you can take your case to Appeals. Don't just go along to get along. The IRS is well trained to try and get you to agree to their findings so they can pocket your hard-earned money even though they may be wrong.

Again, the IRS is wrong A LOT! The nearly $2 million we've saved our clients from IRS overreach shows just how often they get it wrong.

Finally, if you find yourself on the wrong end of an IRS audit, make sure you reach out to your premier tax resolution company - Liberty Tax Defenders! Call us at 817-995-5008 or shoot us an email at: info@libertytaxdefenders.com.

Cheers!

The Liberty Team

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P.S. Make sure you get your FREE copy of our SPECIAL REPORT: "The 8 Secrets The IRS Does NOT Want You To Know!" (simply click on the link in the previous sentence, scroll down to the second section of our home page, and download your copy today!)