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A tax shelter is any entity, plan, or arrangement, a

billing date, you will not have to pay more interest or

significant purpose of which is the avoidance or evasion of

penalties. This period is extended to 21 calendar days if

income tax.

the amount due is less than $100,000.

If you are due a refund, you will receive it sooner if you

Recordings. You can make an audio recording of the

sign the agreement form. You will be paid interest on the

examination interview. Your request to record the interview

refund.

should be made in writing. You must notify the examiner 10

If the IRS accepts your tax return as filed, you will

days in advance and bring your own recording equipment.

receive a letter in a few weeks stating that the examiner

The IRS also can record an interview. If the IRS initiates

proposed no changes to your return. You should keep this

the recording, you must be notified 10 days in advance and

letter with your tax records.

you can get a copy of the recording at your expense.

Transfers to another area. Generally, your return is

If You Do Not Agree

examined in the area where you live. But if your return can

be examined more quickly and conveniently in another

If you do not agree with the proposed changes, the exam-

area, such as where your books and records are located,

iner will explain your appeal rights. If your examination

you can ask to have the case transferred to that area.

takes place in an IRS office, you can request an immediate

meeting with the examiner’s supervisor to explain your

Repeat examinations. The IRS tries to avoid repeat

position. If an agreement is reached, your case will be

examinations of the same items, but sometimes this hap-

closed.

pens. If your tax return was examined for the same items in

If you cannot reach an agreement with the supervisor at

either of the 2 previous years and no change was pro-

this meeting, or if the examination took place outside of an

posed to your tax liability, please contact the IRS as soon

IRS office, the examiner will write up your case explaining

as possible to see if the examination should be discontin-

your position and the IRS’ position. The examiner will

ued.

forward your case for processing.

Fast track mediation. The IRS offers fast track mediation

The Examination

services to help taxpayers resolve many disputes resulting

from:

An examination usually begins when you are notified that

your return has been selected. The IRS will tell you which

•

Examinations (audits),

records you will need. The examination can proceed more

•

Offers in compromise,

easily if you gather your records before any interview.

Any proposed changes to your return will be explained

•

Trust fund recovery penalties, and

to you or your authorized representative. It is important that

•

Other collection actions.

you understand the reasons for any proposed changes.

You should not hesitate to ask about anything that is

Most cases that are not docketed in any court qualify for

unclear to you.

fast track mediation. Mediation can take place at a confer-

The IRS must follow the tax laws set forth by Congress

ence you request with a supervisor, or later. The process

in the Internal Revenue Code. The IRS also follows Trea-

involves an Appeals Officer who has been trained in medi-

sury Regulations, other rules, and procedures that were

ation. You may represent yourself at the mediation ses-

written to administer the tax laws. The IRS also follows

sion, or someone else can act as your representative. For

court decisions. However, the IRS can lose cases that

more information, see Publication 3605.

involve taxpayers with the same issue and still apply its

interpretation of the law to your situation.

30-day letter and 90-day letter. Within a few weeks after

Most taxpayers agree to changes proposed by examin-

your closing conference with the examiner and/or supervi-

ers, and the examinations are closed at this level. If you do

sor, you will receive a package with:

not agree, you can appeal any proposed change by follow-

•

ing the procedures provided to you by the IRS. A more

A letter (known as a 30-day letter) notifying you of

complete discussion of appeal rights is found later under

your right to appeal the proposed changes within 30

Appeal Rights.

days,

•

A copy of the examination report explaining the

examiner’s proposed changes,

If You Agree

•

An agreement or waiver form, and

If you agree with the proposed changes, you can sign an

•

agreement form and pay any additional tax you may owe.

A copy of Publication 5.

You must pay interest on any additional tax. If you pay

when you sign the agreement, the interest is generally

You generally have 30 days from the date of the 30-day

figured from the due date of your return to the date of your

letter to tell the IRS whether you will accept or appeal the

payment.

proposed changes. The letter will explain what steps you

If you do not pay the additional tax when you sign the

should take, depending on which action you choose. Be

agreement, you will receive a bill that includes interest. If

sure to follow the instructions carefully. Appeal Rights are

you pay the amount due within 10 business days of the

explained later.

Page 4

Publication 556 (Rev. August 2005) - Examination Of Returns, Appeal Rights,and Claims For Refund Page 4

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