The Appeals Division of the Internal Revenue Service is designed to provide the Taxpayer with an independent impartial review of his or her case after an Audit is completed or collection action is proposed. It is the last opportunity for the Internal Revenue Service and the Taxpayer to agree to settlement before a case goes to court. The stated mission of the Appeals Division is to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Federal Government and the Taxpayer in a manner which will enhance voluntary compliance and public confidence. Ordinarily, Appeals will resolve an issue through one or more informal conferences and the exchange of documents and memorandums of law. Generally, there is no tape recording equipment, court reporter or stenographer present at an Appeals conference. Typically, the only people present at a conference are the Appeals Officer, the Taxpayer and the Taxpayer’s tax attorney.
The Appeals Officer acts as both the fact finder and arbitrator. It is the function of the Appeals Officer to close as large a percentage of his or her cases as possible on an “agreed” basis. Unlike Revenue Agents and other Internal Revenue Service personnel, an Appeals Officer can take into consideration the so-called “hazards of litigation.” Hazards of litigation can be defined as the Internal Revenue Service determination of the probability that the Internal Revenue Service position might not be upheld by a court. Often it is the consideration of the “hazards of litigation” which will result in a favorable settlement for the Taxpayer. Generally, if a settlement is not reached at the Appeals level, a statutory Notice of Deficiency will be issued to the Taxpayer. The Taxpayer will then have ninety days from the date of the letter to file a petition in Tax Court.