WHAT IS IRS Publication 556: Examination Of Returns, Appeal Rights And Claims For Refund

IRS Publication 556: Examination of Returns, Appeal Rights and Claims for Refund is a document published by the Internal Revenue Service (IRS) that provides information on the audit process, a taxpayer's right to appeal and how a taxpayer can claim a tax refund. If any changes, such as additional taxes due, are proposed by the IRS, the taxpayer can either agree and pay the additional taxes or appeal the decision. If the decision is appealed it can be fast-tracked for resolution.

BREAKING DOWN IRS Publication 556: Examination Of Returns, Appeal Rights And Claims For Refund

IRS Publication 556: Examination of Returns, Appeal Rights and Claims for Refund informs taxpayers of general rules and procedures the IRS follows in examinations, what happens during an examination, appeal rights, and how to file a claim for refund on an already paid tax. The IRS uses software to assign a score to both individual and corporate tax returns, with high scores more likely to result in further review. A tax return can also be pulled for review if information in the return does not match other data sources, such as a Form 1099 or a W-2. Form 1099 reports income from various sources and pertains mostly to business owners or freelancers. A W-2 form reports an employee's annual wages and the amount of taxes withheld from his or her paycheck.

The IRS reviews tax returns for a variety of reasons, and may not make any adjustment to the reported tax figure. If the IRS determines that additional taxes should be paid, taxpayers can hire an Enrolled Agent, attorney or other sanctioned person to represent them in IRS proceedings.

Additional information on the audit process is available in IRS Publication 1, Your Rights as a Taxpayer.

Examinations and Appeals

As explained in Publication 556, in the event of an audit, the IRS notifies a taxpayer that their return has been selected for further examination, as well as what records are needed to conduct the examination and any IRS proposed changes.

Most taxpayers agree to the proposed changes, and the examination is closed. However, if a taxpayer does not agree, they can file an appeal. If the examination takes place in an IRS office, the taxpayer can request a meeting with the examiner’s supervisor. If an agreement is reached, the case is closed. If the taxpayer and  the examiner’s supervisor do not reach an agreement, the examiner will write up the taxpayer’s case explaining their position and the IRS's position.

The IRS offers fast track mediation services to help taxpayers resolve issues and disputes resulting from examinations or audits, offers in compromise and other collection actions.