A tax dispute with the Internal Revenue Service (IRS) can feel like an uphill battle for any small business owner. If you run a business in Kentucky and disagree with a determination the agency has made, you may have a formal path to push back.
Your rights in an IRS appeal
As a Kentucky small business owner, you have the right to appeal most IRS decisions, including proposed changes to your tax liability, penalty assessments and collection actions. You also have the right to bring representation to every stage of the process, whether that is an attorney, a certified public accountant or an enrolled agent.
The appeals process is designed to be less adversarial than litigation. It gives you a chance to present your position, identify areas of compromise and potentially resolve the dispute without the time and expense of a court proceeding.
Common disputes behind a tax challenge
Small businesses across Kentucky encounter a range of issues that can trigger the appeals process such as:
- Disagreements over reported business income or claimed deductions
- Penalties for late filing, underpayment or failure to deposit employment taxes
- Worker classification disputes involving independent contractors vs. employees
- Collection actions such as federal tax liens or wage levies
Now, not every disagreement you have can qualify for a formal appeal. If you received a letter from the IRS outlining your right to appeal, that is generally the starting point for the process.
The role of a formal protest
Filing a written protest is usually the first concrete step toward reaching the appeals office. The agency generally requires this protest when the total amount in dispute for any tax period exceeds $25,000.
Your protest should include a statement of the relevant facts, the specific tax years and amounts at issue and a clear explanation of why you disagree with the IRS position. You should also cite the sections of the Internal Revenue Code or other legal authority that support your argument.
Key moments at a settlement conference
The appeals conference is typically more informal than a court proceeding. It may take place in person, over the phone or by video, depending on the complexity of the case and scheduling considerations.
During the hearing, the appeals officer reviews the documentation, facts and legal arguments from both sides. The officer’s objective is to reach an outcome that reflects what would likely happen if the case went to trial.
A possible path to Tax Court
If the appeals process does not produce a resolution, you may have the option to petition the U.S. Tax Court. This court allows you to contest the IRS determination before paying the disputed amount. You generally have 90 days from the date the agency mails the statutory notice of deficiency to file, and missing that window can significantly limit your remaining options.