Appeal of EITC Due Diligence Penalties

Please refer to Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree, or Publication 5 (SP), Sus Derechos de Apelación y Cómo Preparar una Protesta Si Usted No Está de Acuerdo, for details on your appeal rights and preparing a protest. The process in Publication 5 for appeals, District Court and the Federal Court of Claims procedures apply to preparer penalties. But, you can’t bring a preparer penalty suit to Tax Court.

Appeals within the IRS


If you disagree with the proposed penalties in the Letter 1125 and Form 5816, Report of Tax Return Preparer Penalty Case, you may request a meeting or a telephone conference with the supervisor of the person who signed the letter. Call or write to the person who signed the letter. If we still can’t come to an agreement, you have the right to request a conference with our Appeals Office.

You may request an appeals conference by the deadline on your letter as follows:

  1. If the total penalties shown in our report are $25,000 or less, send us a letter requesting Appeals’ consideration indicating what you don't agree with, and the reasons why. Include your name, address and your daytime phone number.
  2. If the total penalties shown in our report are more than $25,000, you must submit a formal protest. See below for how to prepare a formal protest.

We urge you to provide as much information as you can to help speed up your appeal, saving you both time and money.

How to Prepare a Formal Protest

When a formal protest is required, your protest must include the following:

  • Your name, address and a daytime telephone number
  • A statement that you want to appeal the IRS findings to the Appeals Office
  • A copy of the Letter 1125 and the list of the proposed penalties
  • A list of the penalties you don’t agree with and why you don’t agree
  • The facts supporting your position on any penalties you don’t agree with
  • The law or authority, if any, on which you are relying
  • You must include this statement in your protest “Under the penalties of perjury, I declare that I examined the facts stated in this protest, including any accompanying documents, and, to the best of my knowledge and belief, they are true, correct, and complete.”
  • You must sign the statement
  • If your representative prepares and signs the protest for you, he or she must substitute a declaration stating:
    • That he or she submitted the protest and accompanying documents and
    • Whether he or she knows personally that the facts stated in the protest and accompanying documents are true and correct.

Where to Send Your Protest

Send your protest in the return envelope included with your Letter 1125 by the deadline found in the letter.

If You Miss the 30 day Appeal Period

You can pay the penalties and file the Form 6118, Claim for Refund of Tax Return Preparer and Promoter Penalties, with the IRS office that sent you the billing statement. Generally, if you were assessed a penalty under section 6695, you must file the claim within 3 years from the date you paid the penalty in full. See the Form 6118 and for more information and the instructions.

You can also use the Form 843, Claim for Refund and Request for Abatement. But, if you use the Request for Abatement and don’t pay the penalties, you can’t go to the United States District Court or United States Court of Federal Claims. See the Form 843 and the Instructions for the Form 843 for more information.

If You and the Appeals Office Don’t Agree

If you and the Appeals Office don’t agree on some or all of the penalties, you may file a refund suit with the United States District Court or United States Court of Federal Claims. But first, you must satisfy certain procedural and jurisdictional requirements including paying the penalties and filing a formal claim.

If you wish to file a refund suit, you must file it no later than 2 years from the date of our notice of claim disallowance.

If you pay the penalties and file the claim with the IRS and we haven’t responded to you on your claim within 6 months from the date you filed it, you may file suit for a refund immediately in your District Court or the Court of Federal Claims.

Additional Due Diligence Topics

  
Return to Main Due Diligence page or Return to Main Preparer Compliance page

 

Page Last Reviewed or Updated: 08-Apr-2014