The Tax Times: How to Win at the Independent Office of Appeal

Working effectively with the IRS Independent Office of Appeals is one of the most important skills a tax controversy practitioner can develop. Whether you are in a pre‑Tax Court administrative appeal or handling a post‑petition docketed case, your strategy at Appeals can dramatically change the outcome for your client.

Start With the Facts, Law, and Posture

Appeals only gets involved after there is an actual controversy – usually following an examination and proposed adjustments, or in a docketed Tax Court case where the judge has encouraged or ordered the parties to try to resolve the dispute administratively. In either situation, the starting point is a command of both the facts and the law.

Before you ever speak with an Appeals officer, dissect the revenue agent’s report, identify each adjustment, and map the legal theories supporting and opposing each one. The burden of proof sits on the taxpayer for most issues, so walking into Appeals without a granular understanding of your evidentiary strengths and weaknesses leaves your client exposed to paying more than necessary simply because you were not ready to substantiate a position. Do not assume the Appeals officer “knows the law” on your issue; they see an enormous range of cases and will rely heavily on how clearly you present governing Code sections, regulations, and key authorities.

Build the Right Record and Documentation

Appeals is still part of the IRS, but it is a different audience than Exam. Appeals officers review a closed exam file and then evaluate whether the proposed assessment should stand, be reduced, or sometimes be increased. Your job is to supply the missing context and evidence that shows why the IRS’s adjustments are overstated or unsustainable.

That means coming in with a complete documentation package organized around the issues, not around your client’s bookkeeping system. If the case is about substantiation, you should know exactly which deductions can be proved and which cannot; if only partial documentation exists, calibrate expectations and settlement strategy accordingly. If the core dispute is legal rather than factual—for example, substance‑over‑form or characterization issues—ask candidly whether Appeals is the right forum, or whether you are simply previewing a case that truly needs judicial resolution.

Frame a Persuasive, Straightforward Protest

In most exam cases, your entry ticket to Appeals is a written protest responding to a 30‑day letter. For disputes over $25,000, a formal protest is required and must include: a statement that you want to appeal, identification of the tax periods, a list of each proposed item you disagree with, the facts supporting your position, and the law or authority that backs each argument. Smaller cases may qualify for “small case” procedures or Form 12203, but the discipline of a well‑structured protest is still valuable.

Use the protest to tell a clean story: start with a fact‑based explanation of why the taxpayer is entitled to the result sought, and then layer in the legal analysis. Avoid protests that read like indictments of the revenue agent. Appeals officers are far more receptive to a coherent narrative tying evidence to legal standards than to pages of rhetoric about what Exam “got wrong.”

Use FOIA and the Administrative File Strategically

Knowing what the IRS knows is critical. The taxpayer is entitled to request the administrative file, including exam workpapers, through a Freedom of Information Act (FOIA) request, which the IRS processes under its FOIA guidelines. A well‑timed FOIA request can reveal how the revenue agent built the case, what internal memoranda say about hazards of litigation, and whether there are gaps in the government’s proof.

FOIA requests should reasonably describe the records sought, identify the tax years and issues, and be sent in writing to the appropriate IRS FOIA office as outlined in the Service’s FOIA guide. Expect processing to take weeks or longer; build that lag time into your Appeals preparation calendar and follow up if responses stall.

Focus on Hazards of Litigation, Not Just “Right vs. Wrong”

Appeals’ statutory mission is to resolve tax controversies without litigation, fairly and impartially, while promoting consistent application of the tax laws. A key difference from Exam is that Appeals officers are required to consider “hazards of litigation” when evaluating settlement—the realistic risk that either side might lose, in whole or in part, if the case went to court.

Translate your trial instincts into settlement percentages: identify evidentiary gaps, adverse precedents, conflicting IRS positions, and credibility issues that would matter to a judge, then express those as litigation hazards. The Taxpayer Advocate Service explains that a hazards‑of‑litigation settlement is typically expressed as a percentage allocation of the issue and memorialized on a closing agreement or Form 870‑type waiver, which then forecloses later litigation on that issue. Appeals officers have greater flexibility than Exam because they can weigh these hazards; your presentation should invite them to use that flexibility.

Maintain Professionalism and Credibility

Appeals is not the forum to vent about Exam conduct or IRS frustrations. The IRS’s own guidance and practitioner experience stress that Appeals is intended as an impartial platform; undermining that tone by attacking prior IRS personnel rarely helps and can hurt your client’s credibility. Point out material errors clearly and firmly, but avoid ad hominem criticism.

Credibility is currency at Appeals. Address negative facts and adverse authority head‑on rather than pretending they do not exist. Acknowledge weak spots, explain why they do not control the outcome, and distinguish unfavorable cases where possible. Overstating the strength of your case—or ignoring obvious hazards—signals to the Appeals officer that you are not a reliable narrator and can cause them to discount your entire presentation.

Know the Mechanics: Deadlines, Forms, and Process

From a procedural standpoint, the appeals process is straightforward but unforgiving on deadlines. After an unagreed exam, failing to sign the exam report normally triggers a 30‑day letter outlining appeal rights; the taxpayer generally has 30 days from that letter to file a protest or small case request. Publication 5 explains the required protest elements and also describes when small case procedures or alternative dispute resolution programs may apply.

For disputes under certain thresholds, taxpayers can often use Form 12203, Request for Appeals Review, instead of a full formal protest, listing the items in dispute and reasons for disagreement. Once Appeals receives the case, it aims to resolve disputes without litigation, but interest and penalties continue to accrue until final resolution, and certain settlements will be documented on waiver forms (for example, Form 870 or 870‑AD) that limit the taxpayer’s ability to go to Tax Court later.

Bringing It All Together for Your Practice

For practitioners, success at the IRS Independent Office of Appeals comes from treating it as a quasi‑litigation forum with its own rules of engagement: master the facts and law, control the documentary record, craft a protest that reads like a trial brief distilled for a busy non‑judge, and frame every argument through the lens of realistic litigation hazards. When done well, Appeals can transform an ugly exam result into a reasonable settlement and spare your client the cost and uncertainty of court.

If you or your clients have received an unfavorable IRS audit report or a notice of deficiency and are considering an appeal, experienced representation can make the difference between simply relitigating Exam’s position and achieving a negotiated, hazards‑based resolution that truly reflects the strengths and weaknesses of the case.

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