Growing IRS Appeals Backlog Could Delay Resolution for Business Owners
If you’re ever involved in an IRS audit or tax dispute, you expect the appeals process to provide a fair and timely review. Unfortunately, growing staffing shortages and an increasing backlog within the IRS Independent Office of Appeals are making that more difficult.
While most business owners hope they’ll never need to file an appeal, understanding what’s happening can help you appreciate why good records, timely responses, and professional guidance matter.
Many business owners have never heard of the IRS Independent Office of Appeals until they need it. Understanding its purpose can help you feel more confident if you ever need to challenge an IRS decision.
The Independent Office of Appeals is separate from the IRS teams that conduct audits and examinations. Its role is not to automatically agree with the IRS, nor is it there to simply side with the taxpayer. Instead, Appeals is designed to review the facts objectively and determine whether the original decision was appropriate based on the available evidence.
This independent review is an important taxpayer right and plays a significant role in helping ensure fairness within our tax system.
Recently, however, concerns have been raised within the tax community about changes affecting the Appeals process. Staffing reductions have created significant backlogs, leaving fewer Appeals Officers handling a growing number of cases. As a result, taxpayers may experience longer wait times before their cases are reviewed.
Another concern involves pandemic-era Employee Retention Credit, or ERC, claims. Many businesses whose ERC claims were denied have turned to the Independent Office of Appeals, believing their cases deserve another review. Unfortunately, the large number of ERC cases has added even more pressure to an already strained system.
Tax professionals have also expressed concern that some cases are reaching Appeals before they have been fully developed during the examination process. Traditionally, IRS examination teams gather and evaluate the necessary facts before a case moves to Appeals. When that work is incomplete, Appeals Officers may have to spend valuable time performing work that was intended to happen earlier in the process.
Many practitioners believe this creates additional delays and could affect the independent role Appeals was designed to serve.
The good news is that IRS leadership has acknowledged the growing backlog and has begun taking steps to hire additional Appeals Officers. The goal is to improve efficiency
while maintaining the independence that Congress intended when it officially named the office the Independent Office of Appeals in the Taxpayer First Act.
As a business owner, this situation is a good reminder of the importance of maintaining complete and accurate records throughout the year. Strong documentation makes it easier to support your position during an audit and, if necessary, during an appeal.
If you ever disagree with an IRS determination, don’t assume you have reached the end of the road. Depending on your circumstances, you may have the opportunity to request an independent review of your case. Working with a qualified tax professional can help you understand your options and present the strongest possible documentation.
Most business owners will never need to use the Independent Office of Appeals, but knowing it exists and understanding its purpose can provide peace of mind. A fair and independent review process benefits not only individual taxpayers, but also the integrity of our entire tax system.
If you have questions about an IRS notice, audit, or tax compliance issue, I encourage you to seek professional guidance early. The sooner concerns are addressed, the more options you may have for resolving them successfully.
