In this follow-up episode of Absolute Trust Talk, host Kirsten Howe welcomes back tax law expert Tony Kim to continue their deep dive into IRS audits and appeals. With 26 years of experience working for the IRS, Tony provides invaluable insights into what happens after an audit determination is made. He explains the role of a protest letter, how appeals officers function as mediators, and why IRS litigation can be risky for taxpayers. Throughout the episode, Tony emphasizes the importance of organization, professionalism, and strategic decision-making when dealing with the IRS. He also shares real-world examples of how cases are resolved at different stages of the appeals process. If you’re facing an IRS audit or just want to understand your rights, this episode is packed with essential knowledge.
Time-stamped Show Notes:
0:00 Introduction
1:33 The protest letter: Here’s what you need to know about how it challenges IRS decisions.
4:20 Appeals officers vs. revenue agents—who decides your case?
6:16 The power of appeals—why 90% of cases never reach court. Here’s why.
8:50 Tax Court vs. District Court: Listen in as Kirsten and Tony discuss the key differences and taxpayer options.
10:44 The IRS attorney’s role—can they make things better or worse?
14:31 Next, Tony is sharing important strategies for working effectively with the IRS—what really works?
19:38 How do you determine what to look for when selecting the right tax attorney? Tune in for key considerations.
23:37 Final advice—why staying engaged in your case is crucial!
Transcript:
Hello and welcome to Absolute Trust Talk. I am Kirsten Howe, the managing attorney at Absolute Trust Counsel. In our last episode, we talked with my guest, Anthony Kim, about IRS audits, but we ran out of time. So, I’ve brought him back for another episode to complete our conversation about audits and what happens in the whole process. We only got through about a third of it, so I’m going to have him back.
Just to remind you, Tony Kim is the founder of the law firm Kim & Rosato, which is located in Walnut Creek. He specializes in assisting clients with federal and state tax matters. He represents people before the IRS, using his 26 years of experience representing the government against taxpayers. His inside knowledge is very valuable for his clients.
In our last episode, we discussed the audit phase. At the end of that phase, the IRS representative decides, “Okay, this is what’s going to happen.” The taxpayer then either accepts the decision or files a protest letter. Tony, welcome back. Tell us what happens in this protest letter.
After the agent has determined whether the findings are correct or incorrect, the taxpayer has an opportunity to submit a protest letter. This letter is sent to the agent who made the findings, and in it, the taxpayer outlines what they believe are incorrect determinations. The agent can then review it and, theoretically, acknowledge any mistakes. However, in my 26 years of experience, I’ve never seen an agent admit to a mistake.
Let me stop you there. Is that because they never make mistakes, or are they unwilling to acknowledge when they have made a mistake?
I believe taxes are complex, and everyone, including judges and the IRS, can make mistakes. However, it’s difficult for anyone to take a step back and admit, “You know what? I made a mistake.” That’s the purpose of a protest letter—to highlight errors. Yet, in most instances, the response is a rejection. If the protest letter is denied, it goes to the Office of Appeals. There, a different government official, an appeals officer, is assigned to review the case.
Unlike a revenue agent focused on finding errors and making determinations, an appeals officer acts more like a mediator. They weigh both sides equally and assess the strengths and weaknesses of each argument. They aim to reduce litigation in the courts by resolving disputes before they escalate.
So, is it like mediation in civil court?
Exactly. Although an IRS appeals officer is an IRS employee, they function as a mediator. They review the revenue agent’s findings and the taxpayer’s protest letter, weighing the positives and negatives of both sides. Unlike the revenue agent, an appeals officer can offer a settlement. They may say, “Based on my review, I believe there are risks for both you and the government, so I’d like to offer you a settlement.” This settlement could be a percentage reduction, a full concession, or some middle ground.
For example, I recently represented a client before appeals where the revenue agent’s report assessed over $2 million in additional tax. After presenting a well-organized protest letter and supporting evidence, the additional tax assessment was reduced to about $2,000. The appeals officer weighed the risks of going to court and saw that the government’s case had significant weaknesses.
So, when we talk about “hazards,” we mean the risk of the government not prevailing in court and wasting resources on an unwinnable case?
Exactly. As a litigator, I prepared over 20 organized volumes of records and supporting legal authorities to demonstrate that my client had a strong case. The appeals officer can either be convinced and concede or decide to sustain the IRS’s position. Generally, about 90% of cases are resolved at the appeals level.
If a taxpayer doesn’t like the outcome of an audit, they should always consider filing a protest letter.
Yes. If you disagree with the audit outcome, use the appeals process and present your case. The appeals officer will assess litigation risks and determine if a settlement is appropriate. The taxpayer can take the case to court if no agreement is reached.
There are two venues for litigation: the U.S. Tax Court, which is a prepayment forum (you don’t have to pay the tax before going to court), and the U.S. District Court, where you must pay the tax first. Most taxpayers choose Tax Court because they don’t want to pay a tax they believe they don’t owe.
If a taxpayer accepts the appeals officer’s decision, that’s the end of the case. The IRS cannot take the case to court, correct?
That’s right. Once the IRS decides, only the taxpayer can push the case to litigation.
Now, let’s talk about litigation, which you used to do when you worked for the IRS.
Yes. When an IRS attorney gets a case for litigation, they start by reviewing everything that has been done, including the revenue agent’s report and the appeals officer’s assessment. The attorney must determine whether the IRS’s position is legally and factually supported. If the case lacks merit, the attorney should concede.
A key point: If a taxpayer rejects the settlement of an appeal and proceeds to litigation, the IRS attorney does not start at the settlement amount. The attorney starts with the original audit determination. The taxpayer could end up in a worse position because an IRS attorney may identify additional tax liabilities that the revenue agent or appeals officer missed.
So, a taxpayer who assumes litigation will improve their case may be in for a rude awakening.
Yes. It’s essential to weigh the risks and rewards. Litigation can result in a lower liability but also in additional penalties or taxes if more issues are uncovered.
What strategies do you use now that you’re representing taxpayers instead of the IRS?
One important strategy is organization. Taxpayers often have disorganized records. Presenting documents in an easy-to-read format helps tremendously. Some think they can “bury” the IRS in paperwork to waste time, but that’s not effective. It’s frustrating and counterproductive.
Also, working cooperatively with the government can be beneficial. Some representatives create unnecessary adversarial situations, which slows things down. I always tell my clients to treat the IRS professionally, and they will respond in kind.
That’s similar to how we advise clients applying for Medi-Cal. Submitting an organized, complete package makes the process smoother and avoids unnecessary delays.
Exactly. Many IRS agents just want to close cases efficiently. If they encounter unnecessary resistance, it slows everything down. If a taxpayer’s representative is being unreasonably difficult, I’ve often asked to meet directly with the taxpayer to clarify the issues.
That makes sense. If a representative is dragging out the case unnecessarily, the only one benefiting is the attorney billing by the hour. Exactly. I always recommend taxpayers stay involved and ensure their representative is acting in their best interest, not just prolonging the case for more fees.
That’s great advice. Tony, thank you for sharing your expertise. My guest has been Tony Kim of Kim & Rosato, a highly experienced IRS litigator who now successfully represents taxpayers before the IRS. Thank you so much.
It’s been a pleasure, Kirsten. Thank you for having me. And thank you all for joining us. I hope you learned a lot—I know I did. We look forward to connecting with you next time.
Get In Touch with Tony!
Anthony Kim, Partner
Kim & Rosado Law
https://www.kimrosado.com/
tony@kimrosado.com
(925) 408-4634
Resources Related to This Episode:
- Absolute Trust Talk Ep. 171 https://absolutetrustcounsel.com/171-irs-audits-uncovered-what-triggers-them-and-how-to-prepare/
- Absolute Trust Talk Ep. 057 https://absolutetrustcounsel.com/057estate-tax-returns-why-you-might-want-to-file-anyway/
- Blog: All About Taxes with an Estate Planning Flair: https://absolutetrustcounsel.com/all-about-taxes-with-an-estate-planning-flair-part-i/
- Blog: All About Taxes with an Estate Planning Flair Part 2 https://absolutetrustcounsel.com/all-about-taxes-with-an-estate-planning-flair-part-ii/
- Blog: All About Taxes with an Estate Planning Flair Part 3 https://absolutetrustcounsel.com/all-about-taxes-with-an-estate-planning-flair-part-iii/
- A Will is Not Enough – Securing Your Legacy with Estate Planning Life can change in an instant. A will is not enough to be prepared. Get free access to our actionable E-book Guidebook #1 and start protecting your legacy today. https://absolutetrustcounsel.com/guidebooks/
- Learn how to comfortably define gray areas and assess your unique needs to build a secure future now effortlessly. Check out Guidebook #2, Estate Planning Beyond the Basics, here > https://absolutetrustcounsel.com/guidebooks/
- Get our free introductory guide to the most used estate planning tool, family trusts, and understand how we plan to help protect your family. Guidebook #3: https://absolutetrustcounsel.com/guidebooks/
- Absolute Trust Counsel would love to offer access to our Incapacity Planning resource page: https://AbsoluteTrustCounsel.com/Incapacity-Planning/. We’ve collected our top planning information all in one place so listeners can find videos, guidebooks, blog posts, and a host of information with tips and strategies on implementing, planning, and protecting themselves and their loved ones.
- We’re pleased to provide a library of e-books to address common estate planning questions and concerns in practical, easy-to-understand language. https://AbsoluteTrustCounsel.com/Resources/.
- ASK KIRSTEN: If you’d like Kirsten to answer your question on the air, please email her at Info@AbsoluteTrustCounsel.com.
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