Dealing with an IRS mistake can be a frustrating experience, but it happens fairly often. There are many different types of error the IRS can make:
- Wrongful calculation of penalties and interest
- Wrongful assessment of penalties
- Failure to release a lien
- Misplacement of tax documents
In all of these cases, you will have a tax dispute that needs to be resolved.
How to Resolve a Tax Dispute
The taxpayer bill of rights gives you the right to challenge the IRS’s position on an issue and be heard. The simplest way to do this is by following the instructions on the notice you received from the IRS.
For simple IRS mistakes, you may be able to send them documentation to show that they made a mistake, such as a W-2 that shows your correct income.
If that does not resolve your issue, you can try involving the Taxpayer Advocate. The Taxpayer Advocate is independent of the IRS, and can help resolve some tax issues, particularly for low-income taxpayers.
If your tax dispute still has not been resolved, or if you have a complex case with a large amount of money at stake, you may have to take it to the Office of Appeals. At this point, you should consult with a tax attorney if you have not already done so.
It’s also important to keep in mind that this process is for taxpayers that disagree with the IRS’s position on issue, not taxpayers who cannot afford to pay their tax debt. If ability to pay is your only issue, then you should consider an installment agreement or Offer in Compromise.
The Office of Appeals is an independent organization within the IRS that attempts to resolve cases without requiring them to go to Tax Court. You will have to explain your side of the case again, and hope that you reach someone that agrees with your view of the facts and law.
If your appeal is denied, you can take case to Tax Court as a last result. There is still the possibility that the IRS attorney will settle your case before going to court. In some cases, you may prefer to fight your case in federal district court or the U.S. Court of Federal Claims. Talk to a tax attorney about selecting the best venue for your case.