What Appeals is
The Taxpayer First Act rewrote IRC 7803(e) to establish the “Internal Revenue Service Independent Office of Appeals”, headed by a Chief of Appeals who reports directly to the Commissioner, with one function: to resolve federal tax controversies without litigation on a basis that is fair and impartial to both sides, and paragraph (4) adds that “The resolution process described in paragraph (3) shall be generally available to all taxpayers.” What separates Appeals from an examiner or revenue officer, who must apply the law as the IRS reads it, is settlement authority under Delegation Order 8-8 and Policy Statement 8-47: “Appeals is the only administrative function of the Internal Revenue Service (IRS or Service) with authority to consider settlements of tax controversies” (IRM 8.6.1.1.1), and Publication 5 (Rev. 4-2021, still the current revision) calls it “the only level of administrative appeal within the IRS.” The person who works the case is an Appeals Technical Employee (ATE): an Appeals Officer, Settlement Officer or Account Resolution Specialist (IRM 8.21.3.2), reporting to an Appeals Team Manager (ATM) who approves settlements and closings.
The routes into Appeals
Most cases arrive by one of the routes below. The letter the client received usually says which route applies and how long the client has to use it; the deadline in that letter controls.
| Starting point | How the case reaches Appeals | Where to read more |
|---|---|---|
| Unagreed examination (30-day letter such as Letter 950 or Letter 525) | Formal written protest, or a small case request on Form 12203, Request for Appeals Review, if the proposed change for each period is $25,000 or less (Pub 5, Rev. 4-2021; Form 12203, Rev. 8-2022), sent to the examination office | Formal protest; Small case request |
| Notice of deficiency, then a timely Tax Court petition | After Counsel answers the petition, Counsel refers the case to Appeals unless Appeals issued the notice or the taxpayer opts out (Rev. Proc. 2016-22, sec. 3.01) | Tax Court petitions |
| Lien filing notice or final notice of intent to levy | Collection Due Process or equivalent hearing request on Form 12153 (IRM 8.1.1.5) | CDP hearings |
| Lien, levy, seizure or installment agreement action | Collection Appeals Program request, usually on Form 9423 | Collection Appeals Program |
| Proposed trust fund recovery penalty (Letter 1153) | Protest within 60 calendar days (75 if the letter is addressed outside the United States) (IRM 8.1.1.5) | TFRP |
| Rejected offer in compromise | Appeal of the rejection (IRM 8.1.1.5) | Offers in compromise |
| Denied penalty abatement | Written appeal under the procedure in the denial letter (Pub 5) | Appealing a penalty denial |
| Innocent spouse determination | Appeal request, which may use Form 12509 (Pub 5) | Innocent spouse relief |
The IRM's own chronology for an examination case is useful to keep in view: Compliance usually issues a 30 or 60 day letter with appeal rights; if the taxpayer neither agrees nor appeals, a notice of deficiency follows; if a petition is filed, “Counsel returns case to Appeals for settlement consideration” after the answer; and if no settlement is reached, Appeals returns the case to Counsel for trial preparation (IRM 8.1.1.4). A taxpayer who skips the pre-assessment appeal therefore usually still gets an Appeals look, in docketed status.
More time to protest. The 30 days in the letter are not as rigid as they read. IRM 4.10.8.12.8 acknowledges that the Statement of Procedural Rules does not provide for an extension of the reply period, but says that “as a matter of practice, extensions may be granted under reasonable circumstances”, and lists as reasonable circumstances a taxpayer who retains a representative and needs time to prepare a meaningful protest, a change of representative, sickness or injury, and complex issues requiring research. The request should be in writing with the reason (a telephone request can be granted verbally and confirmed when the written request arrives); the group manager grants it on Letter 686 with a specific extended response date; and “Extensions are normally granted for no more than 30 days unless a specific reason supports additional time.” The exception is statute pressure: if the assessment statute will expire within 240 days, the extension is contingent on the taxpayer signing a statute extension.
Two programs put an Appeals employee in the room without moving the case to Appeals. In Fast Track Settlement, a trained Appeals employee acts as a neutral while the case stays with the examiner (Pub 5); see Fast Track Settlement. Fast Track Mediation for collection works the same way for certain offer and trust fund disputes; see post-Appeals mediation and Fast Track mediation.
What Appeals requires before it accepts a case
Time on the statute. The rule that most often blocks a referral is in IRM 8.21.3.2.1: “Appeals will not accept a proposed deficiency case if the number of days remaining on the Assessment Statute Expiration Date (ASED) for a new receipt is less than 365 days”. Estate tax cases and IRC 6206 cases need 270 days. Examination builds in its own cushion: Technical Services wants 395 days left when it receives an unagreed case, so that 365 remain when Appeals gets it (IRM 4.8.2). Publication 5 is blunt about the consequence: if the client will not extend the statute, “Appeals will not accept your case.” The full rule set, including the 210 and 180 day rules for returned cases, is on the statute and Appeals.
The answer to statute pressure is usually a consent on Form 872 rather than a lost appeal, and the consent need not be open-ended. Under IRM 25.6.22.8, “A restricted consent is a consent which extends the assessment statute of limitations for one or more specific issues only. The statute of limitations is allowed to expire on all other issues.” RRA 98 requires the IRS to tell the taxpayer of the right to request a restricted consent, though the IRM frames it as a right to request, not a right to receive one. IRM 25.6.22.8.2 says the IRS will enter into a restricted consent the taxpayer asks for when the number of unresolved issues makes it practical, the restrictions are clearly described, the issues outside the consent are agreed with provision for assessing any deficiency on them, an appropriate official approves its use, and Area Counsel approves the wording. The restrictive language must appear on or be referenced on the Form 872 itself to bind the IRS (IRM 25.6.22.5.12). For a case headed to Appeals on one or two disputed issues, a restricted consent gives Appeals its 365 days without reopening the rest of the return.
A protest that meets Publication 5. IRM 8.2.1.5 lists a missing protest, or one that lacks detail or fails Publication 5, as grounds for Appeals to return the case to Examination as a premature referral. Other listed grounds include an unprotected statute, pending technical advice, and new information or new issues the examiner has not considered.
An argument based on tax law. Appeals procedures do not extend to cases resting on moral, religious, political, constitutional or similar objections, and “Such arguments are given no weight in settlement.” (IRM 8.1.1.4.1).
No pending criminal matter. Appeals will not consider a case where criminal prosecution, or a recommendation for prosecution, is pending for a tax-related offense, except with the concurrence of Counsel, Criminal Investigation or the Department of Justice (IRM 8.1.1.3.1).
No court-enforceable right to a conference. Appeals review is a statutory expectation, not a right a court will order. In Facebook, Inc. v. IRS, No. 17-cv-06490 (N.D. Cal. May 14, 2018), Counsel had declined to refer Facebook's docketed deficiency case to Appeals, and Facebook sued under the Administrative Procedure Act and for mandamus, arguing that the taxpayer bill of rights in IRC 7803(a)(3) gave it a right to appeal in an independent forum. The district court dismissed, holding that “Facebook does not have an enforceable right to take its tax case to IRS Appeals” or to compel the IRS to refer it. The court found no such right in the 1998 restructuring act, the 2015 codification of the taxpayer bill of rights or the IRS's own procedures, and held that the referral decision was not reviewable under the APA. Congress responded the next year. The Taxpayer First Act of 2019 added IRC 7803(e)(4), under which the Appeals process “shall be generally available to all taxpayers”, and IRC 7803(e)(5): if a taxpayer who has received a notice of deficiency asks for referral to Appeals and the request is denied, the Commissioner must send a written notice that “provides a detailed description of the facts involved, the basis for the decision to deny the request, and a detailed explanation of how the basis of such decision applies to such facts” and describes the procedures for protesting the denial to the Commissioner. The IRS must also report denials to Congress annually. The requirement does not apply when the denial rests on a frivolous position under IRC 6702(c), and nothing in paragraph (5) creates a court remedy, so for the practitioner the statute buys a written explanation and an administrative protest, not an injunction. In a docketed case, the practical protection remains Rev. Proc. 2016-22, which makes referral the default.
What Appeals will and will not consider
No new issues from the government. Under Policy Statement 8-2, Appeals will not raise new issues and will not reopen an issue on which the taxpayer and the IRS agree (IRM 8.6.1.7). The IRM puts the point directly: “The Appeals process is not a continuation or an extension of the examination process.” The exception is a showing of fraud, malfeasance or misrepresentation of a material fact. A new theory or a change in computation is not a new issue.
New information goes back to the examiner. If the taxpayer gives Appeals something the examiner never saw and it needs additional analysis or investigative action, Appeals will either send it to the examiner for comment while keeping the case, or release jurisdiction and return the case, depending on how much statute is left (IRM 8.6.1.7.5). Publication 5 tells taxpayers to give the examiner everything first for that reason.
No hazards on validity challenges. Appeals does not apply litigating hazards to an argument that a Treasury regulation, IRB notice or revenue procedure is invalid, unless an unreviewable federal court decision has invalidated it. It can still settle other arguments and issues on hazards (IRM 8.1.1.3.1). How Appeals weighs hazards is covered in hazards of litigation settlements.
No side conversations with the examiner. Communications between Appeals and the examiner or revenue officer about the merits are prohibited unless the taxpayer has a chance to take part. See ex parte rules.
The first 45 days
For liability, penalty and innocent spouse cases, the ATE must verify the statute and send the initial contact letter within 45 days of receiving the case; for CDP and offer cases the window is 30 days (IRM 8.6.1.2). Non-docketed cases get Letter 5157; docketed cases get Letter 3808 (or Letter 3808-A to counsel of record). The ATE may call instead of writing. The manager may extend the contact time frame for workload or leave, but if it goes past 75 days the manager must write to the taxpayer or representative with a status and the name of the assigned employee. The statute verification deadline cannot be extended past 45 days.
The initial letter carries pre-selected enclosures, such as Publication 4227 (overview of Appeals), Publication 4167 (alternative dispute resolution) and Notice 1016 (stopping interest). ATEs must also offer Secure Messaging in every initial contact (IRM 8.6.1.4.3.1), which is the practical way to exchange documents with the Appeals Officer.
The initial contact is also when the conference format is set. IRM 8.6.1.5.1 lists the options as telephone, correspondence, in person, video conference (Microsoft Teams) and Virtual Service Delivery, and says “Generally, conferences are held by phone.” The ATE must discuss the options with the taxpayer or representative and document the choice. An in-person conference is available on request: Appeals tries to hold it at a location reasonably convenient to the taxpayer, representative and Appeals, and if the assigned office cannot accommodate one and has no alternate site, it offers video first, but “If the taxpayer or representative still prefers an in-person conference, the case will be sent to an Appeals office that does accommodate in-person conferences.” The amount in dispute is generally not a factor in approving a site. If the taxpayer or representative asks for a video conference, the ATE must hold it by video (IRM 8.6.1.5.5). Preparing for the meeting itself is covered in the Appeals conference.
A representative with a valid Form 2848 for the periods and tax receives copies of correspondence. In a docketed case, the ATE communicates with counsel of record, who needs no power of attorney (IRM 8.4.1.9.1).
Case file access under IRC 7803(e)(7)
For a “specified taxpayer” with a scheduled conference, Appeals must provide access to the nonprivileged portions of the case file on the disputed issues, other than documents the taxpayer gave the IRS, at least 10 days before the conference. A specified taxpayer is an individual with adjusted gross income of $400,000 or less, or any other taxpayer with gross receipts of $5 million or less, for the taxable year in dispute (IRC 7803(e)(7)(C); these amounts are fixed in the statute, not inflation-adjusted). The IRM treats any taxpayer with a substitute for return in dispute as a specified taxpayer, and tells ATEs to treat the taxpayer as one whenever eligibility is unclear (IRM 8.6.1.2.1).
The taxpayer may elect to hold the conference sooner than 10 days after receiving the file, but not before receiving it. The request must come before the initial conference; a request made after the conference starts is handled as an ordinary disclosure request. Larger taxpayers who do not qualify can still ask for the file through the ordinary disclosure channels; see getting the examiner's file.
How an Appeals case ends
| Outcome | Document | Effect |
|---|---|---|
| Settlement with mutual concessions | Form 870-AD (income and gift tax); 890-AD, 2504-AD and others by tax type | Pledges no reopening; effective when accepted for the Commissioner (IRM 8.6.4.4.1) |
| Agreement without material concessions | Form 870 or Form 4549 | No reopening pledge; effective when received |
| Docketed case settled | Stipulated decision filed in Tax Court | Signing the decision document is an offer to settle; Counsel signs and files it (Rev. Proc. 2016-22, sec. 3.15) |
| No agreement on a deficiency | Notice of deficiency issued by Appeals | 90 days (150 if addressed outside the United States) to petition the Tax Court (IRC 6213(a)) |
| Refund claim sustained in whole or part as disallowed | Letter 1363 or 1364, by certified mail | Starts the 2-year period to file a refund suit (IRC 6532(a)); see refund suits |
| CAP decision | Closing letter | Binding on the taxpayer and Collection; no judicial review (Form 9423 instructions) |
The IRM sets the tone for settlement: Appeals is to “Provide a prompt conference and a prompt decision in each case.” (IRM 8.1.1.2). Mutual-concession cases closed by Appeals are not reopened by the IRS except for fraud, malfeasance, concealment or misrepresentation of a material fact, an important mathematical mistake, or certain listed transaction items, and reopening requires approval of an Appeals Director of Operations (IRM 8.6.1.7, Policy Statement 8-3).
Questions practitioners ask
Is Appeals really independent if it is part of the IRS?
It is a separate office under IRC 7803(e) whose head reports to the Commissioner, and RRA 98 required the IRS to bar ex parte communications that appear to compromise its independence (Rev. Proc. 2012-18). It is still the IRS: Appeals follows IRS policy and the IRM, and its settlement authority is delegated by the Commissioner.
Can the client skip Appeals and go straight to Tax Court?
Yes. A taxpayer who does not protest the 30-day letter will usually receive a notice of deficiency and can petition. Under Rev. Proc. 2016-22, Counsel will then generally refer the docketed case to Appeals for settlement consideration unless Appeals issued the notice or the taxpayer tells Counsel it wants to forgo Appeals.
What if the examiner says there is not enough time left on the statute?
Appeals will not accept a non-docketed deficiency case with fewer than 365 days left on the ASED (IRM 8.21.3.2.1). The options are to extend the statute on Form 872 (if the dispute is narrow, a restricted consent limited to the disputed issues under IRM 25.6.22.8) so the case can go to Appeals, or to decline and receive a notice of deficiency, which leads to Appeals in docketed status if a petition is filed.
Can we ask for a different Appeals Officer?
There is generally no right to a different ATE, except in CDP cases where the ATE had prior involvement. Concerns about impartiality go to the Appeals Team Manager, and a reassignment request is ordinarily considered only before the ATE begins substantive consideration (IRM 8.6.1.5.2).
Does Appeals look at new documents we never gave the examiner?
Not on its own. If the material needs additional analysis or verification, Appeals sends it to the examiner for review and comment or returns the case, depending on the statute (IRM 8.6.1.7.5). The IRM lets Appeals resolve the case on factual hazards when a taxpayer repeatedly submits new material to delay.