Following an audit, the IRS auditor will issue a 30-Day Letter outlining the IRS’ position on an asserted liability (and creating a right to appeal) before issuing the more formal 90-Day Letter (creating the right to appeal via a Petition the Tax Court). However, a taxpayer may request that the 30-Day Letter procedure be bypassed and that a 90-Day Letter be issued promptly. Alternately, if the taxpayer ignores the 30-Day Letter, the auditor will issue a 90-Day Letter.
Appealing after receiving a 30-Day Letter may be advantageous because it does not start a Tax Court proceeding. If additional information is submitted with the Protest, the auditor may make additional favorable adjustments before transferring the case to the IRS Appeals Division. These additional adjustments may eliminate the need to appeal the case. Moreover, while the appeal must be filed within 30 days, the auditor can retain the case for further consideration while the right to appeal can be preserved.
Appealing a 90-Day Letter may be advantageous because it may lead to a more speedy resolution of the case. Appealing a 90-Day Letter requires filing a Petition with the Tax Court. A Petition to the Tax Court will first transfer the case to the Appeals Division (if not already considered in Appeals). However, after a Petition to the Tax Court is filed, the Appeals Division will only have jurisdiction over the case for a limited timeframe. At the latest, once the Tax Court places a case on the Trial Calendar, Appeals is supposed to transfer the case to IRS attorneys and may no longer have power over the case. The limited time in which to act can be an incentive for the Appeals Division to resolve a case more quickly.
Conversely, when a 30-Day Letter is appealed, the Appeals Division obtains jurisdiction over a case without the pressure of a pending Tax Court trial. This may result in a lower prioritization of the case and it may take longer to have an appeals settlement conference.
In deciding whether to appeal the 30-Day or 90-Day letter, the factual backdrop of a case should be considered. If time considerations require a quicker resolution to a case, appealing the 90-Day Letter may be appropriate. However, as I wrote in a previous post, if a taxpayer wants to position him or herself to make a later claim for attorney’s fees, the 30-Day Letter must be appealed.