After an audit, the taxpayer has basically three options: (i) appeal the matter before an IRS supervisory conference with the auditor’s manager, (ii) appeal within the IRS administrative system, or (iii) appeal using the court system, where the taxpayer can bring his case to the U.S. Tax Court, the U.S. Claims Court, or the local U.S. District Court.
A taxpayer can even use a combined approach. For example, he can first meet with the examiner or the examiner’s manger. Then, if there is no agreement with them at the closing conference, the taxpayer has 30 days to decide what to do. During that 30 day window, the taxpayer should consider seriously the IRS’s proposed adjustments (if any) to the audit.
After 30 days, if the taxpayer does nothing—that is, he or she does not respond to the IRS’s proposed adjustments—the IRS will issue a “deficiency notice,” which then starts the clock ticking, giving the taxpayer 90 days to file a petition with the Tax Court. Unlike the Claims Court and the District Court, Tax Court does not require that the taxpayer first pay the tax deficiency and then appeal with a refund action after an administrative refund claim was denied by the IRS. Similarly, an IRS administrative appeal does not require the taxpayer to first pay his or her deficiency. After Tax Court, cases may be heard in U.S. Court of Appeals, or to the Supreme Court, but only if those courts agree to hear the case.