Can I Appeal an Unfavorable Bitcoin Tax Determination by the IRS?

If your Bitcoin tax issue has already been assessed by the IRS, the agency may have launched an audit. The audit may uncover an array of tax improprieties that result in additional tax due. Alternatively, the IRS may have decided to impose additional tax due to a failure to pay capital gains taxes, employment taxes, self-employment taxes, income tax or other tax obligations related to Bitcoin and other virtual currency — with interest — due to your alleged tax compliance failures.

The appeal of IRS tax determinations is typically available. However, the exact form of appeal that is available will depend on where in the assessment and collection process your matter. Furthermore, taxpayers should consult with a tax attorney before filing an appeal because certain appeal options can limit your ability to file further appeal in the federal courts.

Your Right to Appeal Unfavorable Bitcoin and Other Tax Determinations

If you disagree with the conclusion reached by the IRS, you do have a right to file an appeal. However, strict time limits apply. Taxpayers who fail to file a timely appeal may lose their ability to do so.

However, in general, following the IRS audit and subsequent determination in your matter, you will receive a written letter setting forth your appeal rights. The 30-day letter will set forth the IRS’s determination and your right to appeal. The taxpayer should respond to this letter, but if he or she does not, a 90-day Notice of Deficiency will be issued to the taxpayer.

Should the taxpayer decide to appeal, he or she may elect to file for a small case review. Small case review is available when the amount in controversy is $25,000 or less. Additional appeal options are also available including an appeal in federal court.

The Collection Process Is Also Subject to Appeal

If your matter has already moved beyond the assessment phase and the IRS is attempting to collect on the debt, collection appeals are often available. Collection appeals options include Collection Due Process (CDP) and the Collection Appeals Program (CAP). Each appeal program has a different focus and can impact your subsequent appeal options so it is wise to consult with a tax lawyer before you take any action.