Wednesday, January 14, 2009

IRS Appeals – Settlement of Cases In Appeals After a 90-Day Letter.

I have written a number of posts that discuss 30-Day Letters and 90-Day Letters (Statutory Notices of Deficiency) an how they may be appealed to the IRS Appeals Division. This post discusses what happens at the end of an appeal of a 90-Day Letter.

When a taxpayer receives a 90-Day Letter and Petitions the Tax Court for a reconsideration of the asserted deficiency, the IRS Counsel’s Office will first prepare an Answer in the Tax Court case denying most or all of the positions the taxpayer takes in the Petition.

Following the filing of the Answer to the Petition (and any necessary Reply), if the case has not already been to Appeals via 30-Day Letter, the IRS Attorney will refer the case to Appeals for settlement. Currently, when a case is referred to the Appeals Division, an Appeals Officer will have jurisdiction over the case for 4 months beginning at the time Appeals receives the case.

An Appeals conference should be arranged within 45 days of receipt of the case. If a settlement is reached, Appeals will forward the stipulations and computations back to IRS attorneys who will prepare the settlement documents for filing in the Tax Court. The stipulated settlement will become part of the Tax Court proceeding and then become a judgment in the case.

If at the expiration of the 4 months during which Appeals has jurisdiction over the case a settlement is substantially likely, the IRS attorneys may extend the Appeals Division’s jurisdiction for a period of 60 days (subject to the placement of the case on the Tax Court trial calendar).

[Proposed regulations would extend this authority for such time as there is a reasonable likelihood of settlement but not beyond the date that the case appears on the trial calendar]

If no settlement is reached, the case will be sent to IRS attorneys and formal preparation for a Tax Court trial will begin. Once the case is with IRS attorneys, there is still the possibility of settlement, however, it will be amidst the trial preparation process (i.e. discovery requests, stipulations of fact, preparation of expert reports, etc.).

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