A corporate tax audit can often feel like the IRS has already made up its mind—but an examiner’s report is not the last word. Congress guarantees every business the Right to an Independent Appeal, and the newly fortified IRS Independent Office of Appeals exists precisely to resolve disputes without litigation. Below is a comprehensive, step-by-step guide to show you how our dual-licensed Attorneys & CPAs at the tax law offices of David W. Klasing can transform an unfavorable, high-risk tax audit into a winnable case.
Your Statutory Right to an Independent Appeal
The Taxpayer Bill of Rights (Right #5) and the Taxpayer First Act insulate the IRS Independent Office of Appeals from the examination and collection functions. Appeals’ mandate is simple: resolve tax controversies fairly, impartially, and without litigation on a hazard-of-litigation basis. National statistics show nearly 70% of appealed corporate cases settle short of court—often with steep reductions in proposed tax and penalties.
From Unfavorable Examination Report to Formal Protest
If your corporation receives a Form 4549 Examination Report and 30-Day Letter, you have 30 days to file a formal, sworn protest. Filing on time:
- Tolls collection—no payment is due, while Appeals reviews, which can take a year or more.
- Preserves your statutory appeal rights; miss the deadline and Tax Court becomes your only recourse.
Appeals may revisit any part of the return. If you suspect the examiner missed an exposure item, it may be safer to petition the Tax Court first, where new issues are rarely raised. Our dual-licensed tax attorneys & CPAs at the tax law offices of David W. Klasing conduct a 360-degree merit review before selecting a forum.
Four Primary Grounds for a Corporate Audit Protest
- Misinterpretation of Law: The revenue agent applied the wrong statute, regulation, or precedent (e.g., disallowed a § 41 R&D credit by misreading Treas. Reg. § 1.41-4).
- Misunderstanding of Facts: The law was stated correctly, but key facts were misconstrued, leading to an inflated adjustment (for instance, treating intercompany advances as taxable income).
- Incorrect Facts: The findings rely on data that are flat-out wrong—overstated inventory, misstated basis, faulty transfer-pricing figures. We rebut these errors with source documents, expert reports, and forensic accounting.
- Inappropriate Collection Action: Levies, liens, or a rejected Offer-in-Compromise imposed while liability is still in dispute violate Collection Due-Process rights and form an independent ground for protest.
Key Audit Documents, Deadlines, and Our Response
- Form 5701 or Draft Revenue Agent Report (RAR)
- Meaning: Preliminary list of proposed adjustments.
- Action: Engage immediately, supply missing documents, and correct factual errors before they harden into a formal position.
- 30-Day Letter (Notice of Proposed Adjustment)
- Response Window: 30 days from the date on the letter.
- Our Move: Draft and file a Publication 5–compliant written protest, signed under penalty of perjury, preserving all factual and legal arguments for Appeals review.
- Notice of Deficiency (90-Day Letter)
- Response Window: 90 days to petition the U.S. Tax Court under § 6213.
- Our Move: If an Appeals review has not yet occurred, we file a timely Tax Court petition to stop the assessment clock, then request “docketed” Appeals consideration while litigation proceeds in parallel.
Miss the 90-day deadline, and your administrative appeal rights vanish—interest and penalties begin compounding immediately, and audit reconsideration may become your only (often costlier) and less reliable option.
Crafting the Protest, Navigating Appeals, and Moving to Court When Needed
A winning corporate appeal begins with a persuasive written protest that checks every IRS box and showcases your strongest litigation arguments. Our dual-licensed team produces a single, airtight brief that:
- Identifies each disputed adjustment and dollar amount—showing Appeals exactly what is at stake.
- Presents a coherent fact narrative backed by exhibits (general-ledger detail, transfer-pricing studies, valuations, expert affidavits).
- Cites controlling statutes, regulations, rulings, and case law—framing the audit issues as losers for the IRS in court.
- Ends with a penalty-of-perjury declaration signed by an authorized corporate officer, satisfying Publication 5 requirements.
At the tax law offices of David W. Klasing, our dual-licensed Tax Attorneys and CPAs reverse-engineer the agent’s work papers, correcting computations and surfacing overlooked deductions, weaving those facts into a legal theory with supporting evidence making it clear that the IRS will likely lose at trial. The protest often results in penalties being waived through the Appeals process.
Once docketed, the case shifts to an Appeals Officer (AO) who had no role in the audit. The AO applies a hazards-of-litigation analysis: the weaker the government’s courtroom odds, the deeper its settlement discounts. Appeals now offer Alternative Dispute Resolution tracks—Fast-Track Settlement, Post-Appeals Mediation, and Rapid Appeals—which we selectively deploy when they can facilitate a favorable compromise; otherwise, we proceed under the traditional briefing schedule to maximize leverage.
Should Appeals refuse to settle on acceptable terms, we pivot seamlessly into litigation, choosing the forum that best serves your strategic and financial goals:
- U.S. Tax Court: file within 90 days of the Notice of Deficiency; no tax prepayment is required, and judges are tax specialists.
- U.S. District Court or the Court of Federal Claims: pay the disputed tax, file a refund claim, then sue; advantageous for jury trials or favorable circuit precedent.
This end-to-end trajectory—meticulous protest, informed navigation of Appeals, and smart forum selection—gives your corporation the most excellent chance to slash assessments, erase penalties, and close the audit on terms you can accept.
Contact the Tax Law Offices of David W. Klasing When a Corporate Audit Turns Adverse
At the tax law offices of David W. Klasing, our dual-licensed Tax Attorney-CPA team brings every leverage point to bear the moment you receive a Revenue Agent Report or 30-Day Letter. We stop the IRS from expanding liability by refusing unnecessary Form 872 extensions, raise airtight reasonable-cause and substantial-authority defenses to wipe out § 6662/§ 6663 penalties, invoke § 6404(g) to suspend interest where Service delays exceed statutory limits, and—if Collections moves too soon—file a Form 9423 Collection Appeal Protest to freeze levies within weeks.
Why Corporations Choose Our Administrative-Appeal Playbook
- Cost-effective resolutions — Appeals routinely settles for a fraction of the original assessment.
- Speed — A well-timed protest pulls the file out of Collections quickly, averting liens and levies.
- Reduced risk — Our hazards-of-litigation analysis pressures Appeals to temper aggressive positions.
- Preserved options — Even after Appeals, we can still pivot to Tax Court or refund litigation if needed.
What Sets Our Firm Apart
- Integrated fact-and-law mastery: Our dual-licensed Tax Attorney-CPAs rebuild the agent’s computations and craft robust legal arguments; no finger-pointing between separate firms.
- Privileged communication & advocacy: We handle every IRS contact so executives can stay focused on operations.
- Mobility advantage: David W. Klasing, an instrument-rated pilot, flies our Cirrus SR22 to satellite offices across California state and the Southwest at no travel cost or travel time, providing face-to-face representation wherever your records reside.
- Holistic risk control: We coordinate state conformity, financial-statement reserves, and shareholder communications, preventing post-settlement surprises.
Common pitfalls we help you avoid: signing the RAR out of fatigue (waiving appeal rights); submitting a non-processable protest; volunteering damaging admissions in an Appeals conference; and overlooking compounding interest under § 6601 on large-dollar issues.
An IRS Examination Report is only the opening salvo. With meticulous protest drafting, procedural leverage, and dual-licensed education, training and expertise, we routinely reduce assessments, neutralize penalties, and resolve audits on terms that satisfy middle market and closely held businesses alike. Call (800) 681-1295 or use our secure online scheduler for a reduced-rate, attorney-client-privileged initial consultation. Don’t let an overreaching audit jeopardize your bottom line—put the Tax Law Offices of David W. Klasing between your company and the IRS today.
