Examinations-Appeals and Due Process Hearings

This article is for information purposes only and was not written by Robert B. Clarkson

The IRS procedures are like a pipeline with several check valves in it. Once you go past a particular stage of the process, you cannot go back. The stages of the tax collection process are, in this order: examination; collection; enforcement.

After your case goes past the examination level, the IRS is going to attempt to collect whatever was determined at the examination level. If they cannot collect by letter or threat, then they will go into the enforcement stage and try to levy wages and bank accounts, or seize other property to pay the taxes they say you owe.

Your highest mission should you decide to jerk the IRS's chain IS TO KEEP YOUR TAX MATTER IN THE EXAMINATION STAGE.  It is crucial to not let your situation go on to the collections stage.

The examination stage is where you have all your constitutional rights. Now, you are probably rolling on the floor, because I made that crack about claiming your constitutional rights against the IRS, but its true. You can, should, and must claim your rights at this examination stage of the process, if you want to cause your tax case to remain at the examination stage and be allowed to refute the government’s presumption that your earnings are taxable.

The IRS is required to give you a 30 days notice that they intend to send you a Notice of Deficiency [NOD]. This letter will have a short "trigger phrase" that you should look for. It will say the "proposed changes to your tax and penalties." The word "proposed" is the trigger. The letter will notify you that you have 30 days before the NOD will be issued. TAKE NOTE - YOU ARE NOW IN THE EXAMINATION PHASE AND YOU HAVE ONLY 30 DAYS TO CLAIM YOUR CONSTITUTIONAL RIGHTS.

Within 30 days, you must ask for an OFFICE (that is to say, AN EXAMINATION INTERVIEW. This is NOT an "Appeals Due Process hearing." This step is the one paramount process that almost all people miss. The regulations give you the right to this OFFICE interview at 26 CFR 601.105(b)(2)(i). You have the Constitutional right to be heard, and to dispute a proposed tax liability. That happens ONLY at the OFFICE (EXAMINATION) interview.

At the same time, you should also request a determination from the Secretary of the Treasury, concerning your taxpayer status. These two procedures are crucial, and MUST occur within this narrow, 30-day window.

If you do not ask for these two things, then the examination officer will make the determination about your so-called liability and the amount deemed to be owed and will move the matter on to the collections phase of the process. Now the "check valve" has closed, and there is NO returning to this stage of the proceeding against you! THE DETERMINATION HAS BEEN MADE!!!!

If you have requested the office (examination) interview timely, and the IRS tries to move past this part of the procedure anyway, then you should exhaust your administrative remedies by going to the Taxpayer Advocate. In the event that the Taxpayer Advocate fails to act satisfactorily on your behalf, now your relief is in District Court.

The issue is the violation of the Administrative Procedures Act by the IRS gents. There are specific statutes and regulations that say the IRS cannot move to collections until the Secretary gives you a determination. The regulations also state clearly that you are entitled to an office interview. The courts will simply abate all collection efforts, and order the matter back to the examination stage.

The IRS routinely fails to inform you of your rights to this office interview. If agents or public forms even mention an examination at all, they will try to solicit a mail examination, or a phone examination. DO NOT AGREE TO THIS TYPE OF EXAMINATION.

The reason you don't want to submit to any examination except an office examination is found at 26 CFR 601.105(b)(2)(ii). According to 26 CFR 601.105(b)(2)(ii), you can indicate sums that are exempt from taxation that are on the return. You can also bring in witnesses, and cross-examine any IRS witnesses. With 10 days' advance notice to the IRS, you can make a record of the proceedings, by audiotape or with a stenographer.

Those rights are pretty important reasons to demand the office examination. Until you have the office examination (that you have requested in a timely manner, of course), you have not had your administrative due process. The IRS made the rules in order to comply with the requirements of the constitution and they are bound by them.

I have never known the IRS to grant this office examination at the examination level. However, they always want to force you right into some kind of appeals hearing or "due process hearing." Just think about this for a moment- the "Appeals" hearing is supposed to do just that - hear an Appeal- from an Examination hearing. If there was no Examination hearing, with a decision from an Examination agent, and a record to review, it is not procedurally proper for the IRS to jump right into any Appeals hearing.

Here is what the regulations say about when the appeals process starts. See 26 CFR 601.105(b)(4); "At the conclusion of an office or field examination, the taxpayer is given an opportunity to agree with the findings of the examiner. If the taxpayer does not agree, the examiner will inform the taxpayer of the appeal rights."

In the event you do ask for the office examination here is what the regulations state about that process. See 26 CFR 601.105(b) (2); "If the taxpayer requests an interview to discuss the proposed adjustments, the case is transferred to the taxpayer's district office. If the taxpayer does not agree to the proposed adjustments, regular appeals procedures apply."

So, now you can see, from their own rules, that the appeals process starts AFTER the office examination- IF AND ONLY IF you have already requested an Examination interview. These are the regulations published by the Secretary of the Treasury, so the IRS is absolutely bound by them.

Everyone should see how fundamentally important it is to claim these office examination interviews. The burden of proof is on the government at these office examinations, to enter evidence that what you are doing is taxable- and you can show amounts that are not taxable. [I will show how to accomplish this step, below.]

Everyone who is being audited by the IRS should jump for joy. An audit is an office examination! The audit is one of the only places where the IRS HAS to take testimony. So, if you are involved in an audit, just give them some testimony. An affidavit is testimony. If there is no other testimony offered in the matter, then whatever you truthfully testify in your affidavit must stand as the record. If you do not agree with the examination officer at the examination hearing, THEN the appeals process will start. Think about it....

Now you ask - how does all this information help me?? Well, the answer is this, if you ask for the examination and the status determination- and do not get either of them, or even one of them-the IRS CANNOT move you into the collections stage of the process. You will be in a stand off till they give you your proper and complete administrative due process. If they do try to move you into collections, then you will have to inform some IRS agent [the taxpayer advocate] of the mistake, and identify the errors that the IRS agents are making. They know the consequences of their actions. So the upshot is that your tax matter will stay in the examination stage forever!!!!

The request for an office examination can be used for ANY situation in which the IRS is attempting to penalize you in any manner, including declaring your W-4 is invalid under the Questionable W-4 program.

Always demand the office examination immediately. If the Appeals process is offered at the same time, then make a protest, and ask for the Appeals also, in order to preserve your appeals rights. If the appeals officer gets hold of you before you have had your office examination, just inform him or her that you have requested the office examination and have not had it yet. Remind the Appeals officer that there is no record to appeal, until you do have the office examination.

If they tell you that you will have to take the appeals hearing without any Examination hearing, go immediately to the taxpayer advocate. If the advocate does nothing for you, take the matter to the District Court under the protection and relief of the Administrative Procedures Act. See 5 USC §706 for the meat of your relief.