Federal Income Tax Audits and Appeals

Our cross-border tax planning efforts on behalf of our clients are designed to keep them out of trouble with the Internal Revenue Service (“IRS”) and are almost always effective at doing so, if our recommendations are followed. However, we often have clients engage us who have not had the benefit of our cross-border tax planning assistance before becoming the subject of an IRS tax audit over their residency status or other US tax issues. In these cases, we put our decades of experience handling US cross-border tax issues to work for those clients in handling the audit. We also represent clients in appealing IRS tax assessments resulting from the tax audit process they believe to be unjust.

The IRS tax audit process has many steps. The audit may take place at the IRS offices or in the field (preferably at our offices, rather than at your home, if it is an individual tax audit). The audit usually starts with a meeting (or an extended telephone conference to discuss its likely scope and timing. One or more “Information Document Requests” (“IDRs”) will also be issued by the Examiner, asking you for information and documentation concerning the main issues of the audit, or that support positions taken on a tax return you filed. Based on the information and documentation we provide in response to the IDR, the IRS will refine the scope of their inquiries and may issue one or more additional rounds of IDRs.

If, after considering all of the evidence we submit and any position statement we may deliver with such evidence, the IRS believes that you owe additional tax, they will issue an Examination Report, which describes the adjustments to income and tax they propose to make. Our response to the Examination Report will usually take the form of providing additional supporting documentation for your position (if any) and additional arguments against the proposed adjustments.

After reviewing our responses to the Examination Report, the IRS may issue a Corrected Examination Report, refining their initial proposed adjustments. However, if the responses, information and documentation submitted do not persuade them as to the inaccuracy of one or more of their proposed adjustments, they will issue a Notice of Proposed Adjustment (“NPA”). If you don’t agree with the proposed adjustments, we will then have 30 days to draft an appeal of those proposed adjustments to the IRS Independent Office of Appeals (plus, usually, another 60 days of extensions). That appeal will set forth our position on the issues in more detail than we may have disclosed to the IRS Examiner at the audit stage.

Unlike the IRS Examiner, the Appeals Officer assigned to your case has discretion to settle IRS proposed adjustments after considering our appeal, based on the Appeals Officer’s perception of the potential hazards to the government of litigating the issues raised by the IRS Examiner. Any issues which can’t be settled at Appeals on this basis may then be litigated (without paying the tax allegedly due) by filing a petition within 90 days in US Tax Court. (Alternatively, you may pay the tax claimed to be due, in order to stop the running of interest and penalties, and then sue the IRS for a refund in US District Court or the US Court of Federal Claims).

We have decades of experience handling Federal income tax audits and appeals of post-audit tax assessments, for both nonresidents and residents, as well as international businesses, especially those involving cross-border tax issues. We welcome any inquiries that you may have concerning your specific tax situation. Feel free to call us at (760) 578-5093, contact us via email at Brent@LanceCrossborder.com or by using our online contact form. We will respond to all relevant inquiries quickly and without any obligation.