IRS Appeals Access: When Taxpayers Can Request Review and When They Cannot

Key Takeaways

• Appeals consideration is generally available to taxpayers, but it is not automatic.
• Recent regulations clarify which federal tax controversies qualify for review by the IRS Independent Office of Appeals.
• Certain issues, including frivolous positions, criminal prosecution referrals, designated litigation matters, and disputes Appeals lacks authority to settle, may be excluded from Appeals consideration.
• Timing matters: delays in responding to the IRS or requesting Appeals review can limit or eliminate access.
• Practitioners should evaluate Appeals eligibility early to avoid losing a potential path for resolving IRS disputes without litigation.

For most IRS practitioners, appealing an unfavorable decision from an IRS examination to the IRS Independent Office of Appeals (Appeals) is a regular occurrence. Over time, they may assume that Appeals consideration is always available for taxpayers. Although IRC Sec. 7803(e)(4) provides that Appeals consideration is “generally available to all taxpayers,” it is important that practitioners are familiar with the exceptions and rules in the regulation to determine if their client’s issue actually qualifies for Appeals consideration.

What Tax Disputes Qualify for IRS Appeals Review?

The IRS Office of Appeals has resolved federal tax disputes without litigation since it was established in 1927. On July 1, 2019, the Taxpayer First Act added IRC Sec. 7803(e) to the Internal Revenue Code, renaming the office the IRS Independent Office of Appeals and codifying its function and taxpayers’ statutory right to seek its consideration.

While IRC Sec. 7803(e) codified certain protections for taxpayers, it does not define “federal tax controversy” or outline when Appeals consideration is available. Accordingly, on January 15, 2025, the IRS promulgated Treas. Reg. Sec. 301.7803-2 to clarify in which situations Appeals is or is not available to taxpayers. This regulation generally applies to Appeals requests received on or after February 14, 2025.

Under the regulation, a federal tax controversy is defined as a dispute over an IRS administrative determination concerning a taxpayer's income, employment, excise, estate, or gift tax liability, or a penalty, or an addition to tax, arising from an examination, collection action, or other enforcement activity. Proposed deficiencies, claims for credit or refund, and tax-exempt entity determinations all fall within this definition. The regulations also identify six categories of IRS determinations that would otherwise fall outside the definition but are treated as covered controversies for purposes of Appeals access.

When Is IRS Appeals Not Available?

The regulation outlines 24 exceptions that are excluded from Appeals consideration in certain situations, including:

• IRS determinations rejecting frivolous positions.
• Penalties for frivolous submissions or false information.
• Certain whistleblower award determinations.
• Decisions by agencies other than the IRS.
• Cases involving criminal prosecution recommendations.
• Issues already resolved in closing agreements.
• Cases where the taxpayer argues a Treasury regulation is invalid, unless there is an unreviewable federal court decision invalidating the regulation or provision at issue.
• Cases where the taxpayer argues a notice or revenue procedure is procedurally invalid, unless there is an unreviewable federal court decision holding it invalid.
• Cases or issues designated for litigation or withheld from Appeals consideration in a Tax Court case.
• Cases where the Appeals lacks authority to settle.

For most of these exceptions, whether they apply turns on case-specific facts, such as whether a position is frivolous or a matter has been referred for criminal prosecution, rather than on legal argument. As a result, once those facts are established, there is typically no procedural remedy available to bring the issue back within the Appeals' jurisdiction.

How Timing Can Affect IRS Appeals Access

An otherwise eligible controversy could lose Appeals access because of timing, either because the taxpayer delays its response to an IRS examination or fails to timely request Appeals consideration. A request for Appeals review requires that there be enough time left on the statute of limitations. If there is not enough time on the statute of limitations and the taxpayer is forced to petition the Tax Court, then Appeals may still be available post-Tax Court petition.

In addition, a taxpayer is typically limited to one opportunity for Appeals consideration on a specific issue. If the taxpayer has petitioned the Tax Court and the case is docketed for trial, IRS Chief Counsel has recalled the case from Appeals, or if Appeals has returned the case to IRS Counsel, then Appeals may not be available.

While access to Appeals is now more predictable and generally available, taxpayers should not assume that the review is automatic. It is important for practitioners to be able to identify potential exceptions or circumstances that would prevent Appeals consideration under the Taxpayer First Act.

Preserving Access to IRS Appeals

Given the number of exceptions and timing considerations that may affect Appeals access, taxpayers and practitioners should evaluate potential disputes early in the process. Understanding when Appeals review is available can help preserve options, avoid unnecessary procedural missteps, and support a more efficient path to resolving tax controversies.

If you have questions about IRS Appeals eligibility or how the new regulations may affect a current or potential tax dispute, contact our team to discuss your options.