The small case request: appealing an examination of $25,000 or less per period without a formal protest

The rule

Publication 5 (Rev. 4-2021): “If the total amount of tax and penalties for each tax period involved is $25,000 or less in the letter you received, you may make a small case request instead of filing a formal written protest.” The small case request is a simpler way to ask for the same Appeals review. It does not change who hears the case, what Appeals can settle, or the taxpayer's later right to a notice of deficiency and the Tax Court.

The $25,000 figure comes from Publication 5 (Rev. 4-2021) and Publication 556 (Rev. 9-2013), which state it as a fixed amount; it is an IRS procedural threshold, not a statutory one. Check the letter the client received as well: Publication 5 notes that it may contain information about the appeal rights for the specific case.

Computing the $25,000 test

The test is applied period by period to the amount in the letter. Publication 5 says to include “a proposed increase or decrease in tax (including penalties), or claimed refund.” Interest is not counted, except for an offer in compromise, where the amount for each period is the total unpaid tax, penalty and interest.

Examples are illustrative; the amounts are not drawn from an IRS source.

Who cannot use it

Publication 5 requires a formal written protest, regardless of amount, for employee plan and exempt organization cases and for partnership and S corporation cases. Publication 556 lists the same exclusions. For those taxpayers, see writing a formal protest.

Collection disputes have their own procedures and do not use a small case request at all: CDP hearings use Form 12153 and the Collection Appeals Program uses Form 9423.

How to make the request

Publication 5 gives two methods. The taxpayer may “Prepare a brief written statement listing the disputed issues and why you disagree”, or complete the appeal request form included with the letter, if any, or Form 12203, Request for Appeals Review. Publication 556 describes the letter version as one requesting Appeals consideration, indicating the changes the taxpayer does not agree with, and the reasons.

No penalties of perjury statement is required for a small case request, but the reasons still matter. A request that says only “I disagree” gives the Appeals Officer nothing to evaluate. The IRM lists, as grounds for returning a case to Examination, a protest that “fails to set forth the taxpayer’s position, lacks detail” (IRM 8.2.1.5). Write a short paragraph per disputed item.

After a correspondence examination, the 30-day letter is usually Letter 525 with a Form 4549 report, and Form 12203 may be enclosed with it. See correspondence examinations.

How Examination screens the request

The small case request goes to the examiner, not to Appeals, and the examiner's group decides whether it is “adequate” before the case moves. IRM 4.10.8.12.9.3 (rev. 08-28-2025) sets the test: a formal protest and a small case request “must contain all information required by Pub 5”, but “Adequacy of a protest is generally not determined based on its substantive content, such as whether the protest contains sufficient factual or legal support.” The IRM's own examples draw the line. A request that “indicates disagreement based solely on the inability to pay” is inadequate and goes back to the taxpayer. A protest that states the issues, the reasons for disagreement and the supporting facts is adequate even if the examiner thinks the facts are wrong; the examiner's remedy is a rebuttal, not a return. Write the request so that each disputed item has a reason and a fact, and the examiner has no basis to send it back.

The group's timetable is short. “The protest must be reviewed at the group level, as designated by management, within seven days of receipt to determine whether the protest complies with the requirements as outlined in Pub 5.” If it does not comply, the examiner returns it with Letter 1025 (Letter 1025-A for claims, 1025-B for no-change cases with adjustments) and grants more time to perfect it; a missing copy of the 30-day letter or the signature of only one spouse does not make the request incomplete. If the request raises new facts or arguments, the case may need further development, which is priority work. If the examiner thinks something in the request needs a response but does not change the result, a rebuttal on Form 886-A is prepared, and “A copy of the rebuttal must be provided to the taxpayer at the time the case is sent to Appeals.” (Letter 5072). If the request is complete and no rebuttal is needed, the group manager signs Letter 2280, Transfer to Appeals. IRM 4.10.8.12.9.3.1 sets the overall clock: “all actions (e.g., securing a consent, perfecting or rebutting a protest, holding a group manager conference, etc.) should be completed within 20 days of receipt of a formal written protest or small case request, unless the case requires additional development”. A representative who files the request must include the substitute declaration described in Publication 5 stating that the representative prepared it and whether the representative has personal knowledge of the facts.

Two points follow from the way Appeals receives the case. First, IRM 8.2.1.4 tells the ATE, within 45 days of assignment, to verify the statute, decide whether the case is ready for Appeals, make initial contact, and “Attempt to settle the case based on factual hazards if the case submitted by the originating function is not fully developed and the taxpayer has provided no new information or evidence.” A thin examination file therefore helps the taxpayer in Appeals, so long as nothing new is introduced there. Second, IRM 8.2.1.7.2 states the limit: “ATEs are not investigators or examiners, may not act as such, and will not take investigative actions or perform analysis of new information or new issues.” Receipts, logs and reconstructions that the examiner never saw go to the examiner with the request, or the case will come back.

Form 12203 line by line

Taxpayer name(s) and TIN(s)Identification

As shown on the letter. For a joint return, both spouses.

Mailing addressAddress

Current address. If it has changed, also file Form 8822 so later notices reach the client.

Tax form number; Tax period(s) endedReturn and periods

For example, Form 1040 and 12/31/2023. List every period you are appealing.

Telephone number(s); Best time to callContact

The Appeals Officer usually starts by phone.

Disagreed item / Reason why you disagreeIssues

One row per adjustment on the report: the item (for example, Schedule C car and truck expenses) and the specific reason. Add pages and attach copies of documents already given to the examiner.

Name of Taxpayer, Signature, DateSignature

Each spouse signs on a joint return.

Name and signature of authorized representativeRepresentative

If the representative signs, the form says to attach a completed Form 2848.

The form's purpose statement says to use it for proposed examination adjustments “of $25,000 or less to a tax year examined” and to return it to the address in the heading of the IRS letter. Form 12203 also states the consequence of doing nothing in an income tax case: the IRS will send a notice of deficiency and a bill. See Form 12203 for the form page.

What happens after the request

Examination forwards the case to Appeals. Appeals still applies the statute rule: it will not accept a non-docketed deficiency case with less than 365 days left on the assessment statute, so the examiner may ask the client to sign Form 872 first (statute and Appeals). The ATE verifies the statute and sends the initial contact letter, usually Letter 5157, within 45 days of assignment (IRM 8.2.1.4), and then holds the conference, most often by telephone (what happens at an Appeals conference).

Two settlement points matter for small cases:

• Specific dollar settlements. Appeals may settle for a percentage or stipulated amount of the tax that approximates the computed result. The IRM says these are appropriate when the case is a small tax case, which it defines as “a non-docketed or docketed case that would qualify for “S” case procedures, if docketed.” The issues must be nonrecurring, the settlement must affect only years in Appeals, and there must be a single taxpayer. They are not used for issues such as earned income credit bans, self-employment tax, NOLs, capital loss carryovers, depreciation or employment taxes (IRM 8.6.4.2.3).
• New documents. Documents the examiner never saw may send the case back to Examination for review (IRM 8.6.1.7.5). In a correspondence case, send the documents to the examination unit with or before the request.

If there is no agreement, Appeals issues the notice of deficiency, and the client has 90 days to petition the Tax Court (notice of deficiency).

Practical points for small cases

Who can represent. Form 12203 says a representative must be an attorney, a certified public accountant or an enrolled agent authorized to practice before the IRS, and that Appeals needs a signed Form 2848 if the representative will talk to Appeals without the taxpayer. Publication 5 adds that a person who does not qualify may attend the conference as a witness but may not represent the taxpayer.

Case file access. An individual whose adjusted gross income for the year in dispute is $400,000 or less is a “specified taxpayer” under IRC 7803(e)(7) (a statutory amount) and can ask for the nonprivileged case file at least 10 days before the conference. The ATE must offer it in the initial contact; respond before the conference is held (IRM 8.6.1.2.1.1).

Penalty-only disputes. Publication 5 applies the same protest rules to denials of penalty abatement. In penalty appeals, Appeals encloses Publication 4576, Orientation to Penalty Appeals Process, which covers the process, representation and payment options (IRM 8.6.1.2). See appealing a penalty abatement denial.

Interest and format. Interest continues while the case is in Appeals; the initial contact letter encloses Notice 1016, How to Stop Interest on Your Account. Conferences are generally held by phone, and the ATE must hold a video conference if the taxpayer or representative asks for one (IRM 8.6.1.5.1 and 8.6.1.5.5).

Small case request versus the Tax Court S case

The two are unrelated except that a non-docketed case that would qualify as an S case if docketed is treated as a small tax case for Appeals settlement purposes. For the Tax Court procedure, see the small tax case (S case) procedure.

Questions practitioners ask