IRS Deficiency or Determination: Options if you Disagree

February 22, 2024 by Kaylie Jonutz
Internal Revenue Service Sign

If you’ve received an IRS deficiency or IRS determination and disagree with the changes, how can you dispute them? Read on because we’re here to help!

The two options for appealing a decision outside the IRS are 1) in U.S. Tax Court, or 2) paying the balance and filing a Federal Refund Suit. Let’s get into it.
 

First: why would one receive an IRS deficiency or determination?


An IRS deficiency or determination comes about as the result of an audit.

Let’s say you filed as an individual (not a business) and received an audit. If, upon the completion of the examination, you disagree with the results – you now have the right to appeal the examiner’s decision. If you continue to disagree with the IRS after Appeals, you will then have the option of filing a petition with the U.S. Tax Court.

If you don’t want to go through the process of appealing the decision, you can pay the balance you disagree with and file a claim for refund with the IRS. If they continue to disallow your claim for refund, you can file suit in the Federal District Court in the district you live in.  
 

What can you do?


We’ll discuss petitioning the Tax Court since most cases that go in front of this court stem from audits. Tax Court cases resulting from an audit generally start with a Tax Court petition, most often filed in response to an IRS Notice of Deficiency. You typically have 90 days from the date the notice was mailed to you to file the petition with the Tax Court. If you live outside the US, you have 150 days from the date the IRS mailed the Notice of Deficiency to file a petition with the Tax Court. The petition form can be found on the Tax Court website: https://www.ustaxcourt.gov/petitioners_start.html#START14.

When filling out the petition, you need to know which IRS notice your petition is based on. These are the ones you can choose from:

 

  • Notice of Deficiency
  • Notice of Determination Concerning Collection Action
  • Notice of Final Determination for Disallowance of Interest Abatement Claim
  • Notice of Determination of Worker Classification
  • Notice of Determination Concerning Relief from Joint and Several Liability Under Section 6015 (under certain circumstances)
  • Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the Department of State
  • Notice of Determination Under Section 7623 Concerning Whistleblower Action.

Once you mark the correct notice, you will select whether you want your case to be heard under the small tax case procedures or regular case procedures. You may be thinking, “What’s the difference?” One of the main differences is that small tax cases are more informal. However, not all cases qualify for the small tax case procedures. For instance, taxpayers with disputes over $50,000 generally do not qualify for the small tax case procedures. Additionally, if you are petitioning the Tax Court to hear a whistleblower case or for a case regarding the certification of seriously delinquent federal tax debt to the Department of State, you must request your case be heard under the regular tax case procedures. A drawback to the small tax case procedures is that the decision cannot be appealed to the Court of Appeals. If having the option of filing an appeal is important to you, then be sure to select the regular tax case procedures. If no selection is made, the Tax Court automatically files the case under the regular procedures.
 

Next, you need to explain why you disagree with the IRS and state the facts you are relying on to support your case.


It would be best if you also choose a place of trial since Tax Courts are travel courts. Because of this, they have locations all over the country that you can choose from. Petitions can be submitted electronically or by mail. Whether you file your petition by mail or electronically, it is vital that you submit your petition timely. Since petitions are received by the Tax Court in Washington, D.C., electronic petitions must be filed by 11:59 p.m. Eastern Time Zone on or before the due date. Those who are not located in the Eastern Time Zone and are filing last minute will want to make any needed time zone adjustments. If you decide to mail your petition, it is considered timely if it is received by the postal service or designated delivery service and postmarked on or before the due date.

Once your Tax Court petition is filed, the IRS will have an opportunity to respond. The IRS generally has 60 days from the receipt of the petition to file their answer with the Tax Court.

Before the case is heard in Tax Court, you will have the opportunity to settle your case with the IRS Appeals Office. Most cases that are petitioned to Tax Court are settled before the trial date. If your case already went to Appeals before you submitted your Tax Court petition, the IRS Council will review your case and try to come to a settlement agreement.

If your case is still unsettled by the trial date, the case will go to trial, and the Tax Court judge will decide how the case should be resolved. In the video below, Arnold van Dky, Esq, Director of Tax Services at TaxAudit, goes into greater detail about the Tax Court process.


As previously stated, if you disagree with an IRS collection action, filed a timely request for a Collection Due Process Hearing, and still disagree with the IRS’s decision, you can file a petition with the Tax Court after Appeals issues a Notice of Determination. You have 30 days from the date the IRS mails the notice to file the Tax Court petition. If you lose your decision in IRS Appeals, you must show that the IRS Appeals Officer abused their discretion in ruling for the collection action. In collection actions, the Tax Court determines whether the IRS abused its discretion in determining the collection action. Considering this, the cards are already stacked against the taxpayer as far as trying to persuade the judge to rule in favor of the taxpayer. That is a little introduction on Tax Court cases and Tax Court proceedings.

Although TaxAudit does not try cases in Tax Court (we do represent taxpayers in pre-litigation Appeals review prior to trial), TaxAudit’s Tax Debt Relief (TDR) specializes in collections issues. Whether you have an audit or collection issue, you should contact us immediately, and we can help guide you through the next steps.

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