IRS Audit Appeals Strategy | Former IRS Auditor

▶

Watch: IRS Insider Interview with Romeo Razi & Yoav Betsion, EA

20 years of IRS collection, audit strategy, and real case stories — including the details on this page. Watch on YouTube →

The standard audit path — and its hidden risk

Most people think of the audit appeals process as linear: IRS auditor proposes changes, you disagree, you go to Appeals, you resolve it. That's the standard path. But it has a significant hidden risk that most taxpayers — and some tax professionals — don't understand.

When you go directly from the auditor's proposed changes to the IRS Independent Office of Appeals, the Appeals officer receives your entire case file. They're not limited to the three or four items you disputed with the auditor. They can look at anything on your return. If they spot something the auditor missed, that becomes a new problem.

Yoav Betsion, EA — IRS Insider Interview

"If you go directly to appeal, appeal can look at anything on the return. So what we do with the attorney is, after the audit, when you get the Statutory Notice — you have the option to go to appeal or to go to Tax Court. We file a petition to Tax Court. The Tax Court will not look at the case — they push it back to appeal. But by coming from the Tax Court, now appeal can only look at those four items we originally contested. It protects the client from exposure expanding."

The Tax Court petition — what it does and doesn't do

Filing a Tax Court petition after receiving a CP3219A (Statutory Notice of Deficiency) does not mean you're going to trial. In practice, the vast majority of Tax Court petitions are resolved through settlement — either directly between you and the IRS, or through the Tax Court's pre-trial settlement process.

What the petition does:

Stops the IRS from assessing the proposed tax while the case is pending in Tax Court
Routes the case through Tax Court's docketing process, which then typically sends it to IRS Counsel (the IRS's own attorneys) for settlement discussion
Limits the scope of any resulting Appeals conference to the items in the petition — protecting you from an expanded examination
Preserves your right to judicial review if settlement talks fail

Yoav Betsion, EA — IRS Insider Interview

"What I always want to get before I go to appeal through the Tax Court is the reply from the IRS auditor. Because it's kind of putting the IRS in a corner about their position on the issues. Later if I need to argue, they've already committed to a position on some items. So it's much easier than when you have the position and they come back trying to say something different. I always want the auditor's written position first."

When IRS agents don't follow their own procedures — and what to do

This is something the IRS doesn't advertise, but former agents know it well: IRS auditors sometimes don't follow proper procedure. When they don't — and you know what the procedure is — you have real leverage.

Romeo Razi, CPA — IRS Insider Interview (Worker Reclassification Audit)

"The auditor was very difficult. She said she wasn't going to consider my rebuttal. I told her: legally, you have to. When I submit a written argument, you have to consider it and write a written rebuttal explaining your disagreement. You can't just say you're not going to consider it. She kept saying 'you can go to appeals.' I requested a manager conference — which I knew I was entitled to. The manager got on, was also difficult at first, then I walked him through the rebuttal. I could tell under his breath he knew they'd lost. That case ultimately went to appeals where the appeals agent called me and said: 'I don't know why they sent this to me. They are dead in the water.'"

Taxpayers have specific, statutory rights during IRS examinations, including: the right to be represented (and to have the auditor communicate only through your representative once representation is established), the right to a manager conference when an auditor's behavior is improper, and the right to have a written rebuttal formally considered and responded to in writing. Knowing and asserting these rights changes how audits unfold. If you're facing an office audit and want to know exactly how to prepare your documentation, see our IRS office audit preparation guide — including the binder method that turned a 3-hour audit into a 20-minute no-change.

The Trust Fund FOIA strategy — how a procedural error saved $2 million

Beyond audit strategy, one of the most powerful (and underused) tools in IRS disputes is the Freedom of Information Act (FOIA) request on the IRS's own case file. By requesting the IRS officer's or auditor's file, you can sometimes find procedural errors that invalidate their assessments entirely.

Real Case — Yoav Betsion, EA, IRS Insider Interview

"We had a $14 million payroll tax case. Trust fund portion was about $6 million. We did a FOIA request on the IRS officer's file and found that the trust fund assessment was made in December, but the manager's signature — which is required before you can assess trust fund penalties — wasn't dated until April, four months later. Someone realized the manager hadn't signed, and it's all electronic, so they couldn't go back and fix it properly. We requested abatement on close to $2 million because the trust fund penalties were not assessed correctly. The IRS is not always right."

The IRS Internal Revenue Manual contains specific procedural requirements for how assessments must be made, documented, and approved. When those procedures aren't followed, assessments can be challenged. Practitioners who know the IRM and who use FOIA requests to inspect the underlying case files find these errors more often than the IRS would like.

The EV tax credit lesson — always push back in writing

Romeo Razi, CPA — IRS Insider Interview

"I had a client who took the $7,500 EV tax credit for a Tesla. Unusual timing on the purchase. The IRS sent a letter saying he's not qualified. We sent a letter back — here's why he is qualified, ABC, here's the law. Six months later they came back: still not qualified. I got upset. My second letter was more aggressive in tone: 'You guys are wrong. Check yourself. Here is why.' Six months after that, we received a letter saying: you're correct. We approve the credit. They don't know everything. An IRS employee telling you something isn't final. You have the right to push back, and sometimes you have to push back twice to get it right."

This is the pattern that defines effective IRS representation: document everything in writing, know the law better than the agent does, and don't accept a wrong determination just because the IRS said it. Written rebuttals create a record. They commit the IRS to positions. And they can be reviewed by someone with more authority who may see it differently.

What Romeo learned from representing both sides of the audit table

After three years inside the IRS as a Tax Examiner, then four years defending taxpayers at a CPA firm, then a decade running his own practice, Romeo Razi has a vantage point almost nobody in private practice has: he knows what IRS agents are thinking, what they're looking for, and what makes them stand down.

The most dangerous IRS agent you'll ever face

"The most dangerous IRS agent you can ever come across," Romeo says, "is one who used to run their own CPA firm, decided for retirement to go work at the IRS so they can work fewer hours — because they know the tax law like the back of their hand." These agents know every legitimate planning strategy, every common aggressive position, and every documentation requirement. They can't be bluffed. The only defense is perfect documentation and knowing the procedural rules as well as they do.

The new Power of Attorney right — a procedural tool most practitioners miss

When a new Power of Attorney representative enters a case — even a case that's at the final stages of audit — the IRS is required to give the new representative time to get caught up on the matter. This is not a courtesy; it's a procedural right.

Romeo used this in a worker reclassification case referred at the tail end: "I told the agent: I'm a new Power of Attorney. You have to give me the courtesy to get caught up on the case. Give me two weeks. If not, I'll ask your manager." The agent backed down, gave the two weeks. Romeo found mathematical errors and contradictions in the agent's report. He wrote a formal rebuttal with legal citations. The agent refused to consider it. Romeo went to the manager. The manager reached out to IRS legal counsel. Six months later, the Appeals officer called and said he didn't know why the case was sent to Appeals — it was being closed with no assessment. The full $40,000–$50,000 assessment disappeared.

Romeo Razi — Former IRS Tax Examiner

"I tell every IRS agent immediately when I call: 'I'm a former Revenue Agent.' Not to intimidate — to signal that I know their system, I know their rules, and I know what they're supposed to do. It changes the conversation. Suddenly we're not adversaries across a desk. We're two people who both know how this works, figuring out how to close the case."

When clients represent themselves — what Romeo has seen happen

The number of times Romeo has seen taxpayers open their mouths in an audit and create assessments for themselves is, in his words, "unbelievable." People want to explain how hard they work, how legitimate their business is, how great their records are. Every sentence is potential material for an additional assessment. The instinct to explain yourself is the wrong instinct in an IRS audit. Your representative's job is to put a wall between you and the agent — to answer exactly what's asked with documentation and nothing more.

Frequently asked questions about IRS audit appeals

Should I always hire a representative for an IRS audit?

Not necessarily. Simple audits with a single straightforward issue (a missing document, a single deduction being questioned) can often be handled directly. Complex audits — especially worker reclassification, business income, multi-year issues, or any audit where the proposed assessment exceeds $10,000 — benefit significantly from professional representation. The auditor's psychological dynamic changes when they're dealing with a CPA or EA who knows the rules as well as they do.

What is a manager conference and how do I request one?

A manager conference is a meeting (usually by phone) with the auditor's supervisor, which you can request at any point during an IRS examination if you believe the auditor is acting improperly, refusing to consider your documentation, or making errors. You request it by calling the auditor and asking to speak with their manager, or by putting the request in writing. This is a formal taxpayer right, not a courtesy the IRS can refuse.

What is the IRS Internal Revenue Manual and why does it matter?

The IRM is the IRS's internal procedural guide — it tells IRS employees how to conduct audits, assessments, collections, and appeals. It's publicly available on the IRS website. When IRS employees don't follow the IRM, their actions can sometimes be challenged. Practitioners who know the IRM can catch procedural violations (like the missing manager signature in the payroll tax case) that the IRS would never volunteer.

Other IRS notices explained by a former IRS auditor:

👥 LinkedIn

Romeo Razi, CPA

Former IRS Tax Examiner (Individual & Employment Tax Division) · CPA · Featured in MarketWatch, U.S. News & World Report, Realtor

Romeo conducted face-to-face audits at the IRS across sole proprietors to mid-sized businesses, worked on worker reclassification audits with the Department of Labor, and prepared disputed returns for Tax Court and Appeals. He founded Taxed Right LLC in 2015 to put that insider knowledge to work for taxpayers.

What is a 30-day letter and a 90-day letter — and what's the difference?

After an audit, the IRS sends a 30-day letter (technically the Revenue Agent Report or RAR) proposing adjustments and giving you 30 days to agree, disagree, or request an Appeals conference. If you don't respond or don't resolve at Appeals, the IRS sends a 90-day letter — the Statutory Notice of Deficiency (CP3219A). This is a critical statutory document: you have exactly 90 days to petition Tax Court. Miss that deadline and you permanently lose the right to challenge the liability in Tax Court. The 30-day letter is an invitation; the 90-day letter is a deadline.

What is the IRS Examination Division and how is it different from Collections?

The IRS Examination Division (auditors) and the Collection Division (revenue officers) are completely separate functions. An examiner's job is to determine if your return is correct. A revenue officer's job is to collect what's owed after the examiner's determination is final. Once a case moves from Examination to Collection, it means the liability has been finalized — either through agreement, a Tax Court decision, or the 90-day deadline passing. Appeals sits between the two: it's part of the IRS but is supposed to function independently from both.

Can I use FOIA to get the IRS audit file?

Yes. Under the Freedom of Information Act (5 U.S.C. § 552) and the Privacy Act, you can request the IRS's complete administrative file on your audit — including the examiner's workpapers, the determination rationale, and internal communications. This is how Romeo Razi discovered a manager signature missing from a trust fund assessment — a procedural error that invalidated $2 million in penalties. FOIA requests to the IRS go to the specific disclosure office for the campus handling your case. Processing takes 60-90 days but the file can reveal significant errors.

What is the statute of limitations on IRS audits?

Under IRC § 6501, the IRS generally has 3 years from the date a return is filed to assess additional tax — the standard audit window. This extends to 6 years if there's a 'substantial omission' of income (omitting more than 25% of gross income reported). There is no statute of limitations for fraudulent returns or for years where no return was filed. The 3-year clock starts from the later of the due date or the actual filing date.

What is the IRS manager conference right and when should I use it?

Under the Taxpayer Bill of Rights (IRC § 7803), you have the right to request a conference with an IRS manager at any point during an audit. This is separate from the Appeals process. A manager conference is most useful when you believe the revenue agent is applying the law incorrectly, being unreasonably aggressive on minor items, or has failed to consider documentation you've already provided. The manager has authority to resolve the case on the spot if they agree the agent has overreached — and unlike Appeals, a manager conference doesn't start any new clocks.

What records does the IRS need for a business expense audit?

Under IRC § 274(d), certain business expenses require 'adequate records' — the Cohan rule (which allows courts to estimate expenses without receipts) doesn't apply to listed property. Specifically, the IRS requires contemporaneous records for: vehicle use (mileage logs), travel, entertainment (largely eliminated post-2017), business meals (50% deductible with documentation), and gifts. 'Adequate records' means a written record or other documentary evidence showing amount, time and place, business purpose, and business relationship. The IRS examiner's guide (IRM 4.10.7) is specific about what qualifies for each category.

Have an IRS problem? Talk to someone who used to work there.

Romeo Razi spent years inside the IRS as an auditor. He knows how the agency thinks, where they make mistakes, and how to get you the best possible outcome.

Get a Free Case Review →