Tax Protest

Below is a plug-and-play, formal written protest template you can reuse across the five audit patterns. It is drafted to meet the “formal written protest” adequacy requirements described in IRS Publication 5 (request Appeals consideration; taxpayer identification; tax periods; statement of disputed issues/changes; facts; law/authority; reasons; signature under penalties of perjury; and special perjury declaration if filed by a representative).

Use notes:

· Send the protest to the address on the IRS letter proposing the changes (do not send directly to Appeals).

· If you are under TEFRA/BA partnership procedures or have a specific procedural letter, adapt the “Taxpayer” definition and caption accordingly.

· This is a professional template, not legal advice; tailor to local circuit precedent and the exact exam letter.

TEMPLATE — FORMAL WRITTEN PROTEST TO IRS APPEALS

(Replace bracketed fields. Delete drafting notes before filing.)

[Taxpayer Legal Name] [EIN or SSN] [Address] [City, State ZIP] [Phone] | [Email (optional)]

Date: [Month Day, Year]

Via Certified Mail / Fax / Upload (as permitted by IRS letter) Internal Revenue Service [Examiner Name, if known] [Office/Group] [Address from IRS Letter]

Re: FORMAL WRITTEN PROTEST — REQUEST FOR APPEALS CONSIDERATION Taxpayer: [Taxpayer Name] Tax Type: [Form 1040 / 1120 / 1120-S / 1065 / etc.] Tax Period(s): [e.g., year ended 12/31/2023; 12/31/2024] IRS Letter/Report: [30-day letter number; RAR; Form 4549/5701 date] Exam Control No.: [if shown] Amount in Dispute: $[total] (tax) + $[penalties] (penalties) + interest (statutory)

1. Request for Appeals Consideration

Pursuant to the procedures described in IRS Publication 5, [Taxpayer Name] hereby requests consideration by the IRS Independent Office of Appeals for the proposed adjustments described in [identify enclosed RAR, Form 4549, Form 5701, etc.] dated [date].

2. Taxpayer Identification / Representative Information

Taxpayer: [Legal name] EIN/SSN: [ ] Entity Type: [Individual / C corporation / S corporation / Partnership / Trust] Primary Contact: [Name/Title] Phone/Email: [ ]

Authorized Representative (if any): [Name], [Firm], [CAF No.], [PTIN], [Phone/Email] Enclosures: Form 2848 (Power of Attorney) and any required authorizations.

3. Tax Periods and Proposed Changes Disputed

This protest addresses the following periods and proposed changes (per the enclosed IRS report):

Tax Period	IRS Proposed Adjustment / Issue	Tax Increase (IRS)	Penalty (IRS)	Taxpayer Position
[YYYY]	[Issue 1]	$[ ]	$[ ]	Dispute
[YYYY]	[Issue 2]	$[ ]	$[ ]	Dispute
[YYYY]	[Issue 3]	$[ ]	$[ ]	Dispute/Concede in part

Exhibit A: IRS Examination Report (RAR) / Forms [4549/5701/etc.].

4. Issues Presented (State Separately)

The disputed issues are:

Issue 1. Whether [short legal question]. Issue 2. Whether [short legal question]. Issue 3. Whether [short legal question]. Penalty Issue (if asserted). Whether the [§6662 / other] penalty applies and, if so, whether reasonable cause and good faith apply to abate the penalty.

Drafting discipline: keep each issue to one sentence; no facts here.

5. Statement of Facts (Organized, Verifiable, With Exhibits)

The following facts are true and support the taxpayer’s position. Unless noted, facts are not disputed.

5.1 Background and Parties

1. [Taxpayer Name] is a [entity] engaged in [business] since [date]. (Ex. B-1)

2. Relevant operations during the years at issue include [ ]. (Ex. B-2)

5.2 Chronology (Recommended)

· [Date] — [Event]. (Ex. C-1)

· [Date] — [Event]. (Ex. C-2)

· [Date] — [Event]. (Ex. C-3)

5.3 Facts Relevant to Issue 1

· [Fact 1 with exhibit cite].

· [Fact 2 with exhibit cite].

· [Fact 3 with exhibit cite].

5.4 Facts Relevant to Issue 2

· [Fact 1 with exhibit cite].

· [Fact 2 with exhibit cite].

5.5 Facts Relevant to Penalties (if applicable)

· [Describe process, reliance, documentation, disclosure posture, advisors, internal controls]. (Ex. P-1 to P-__)

6. Applicable Law and Authorities (Issue-by-Issue)

Rule: cite controlling sources first (Code/Regs), then cases, then administrative guidance. Do not bury your best authority; lead with it.

6.1 Authorities — Issue 1

· IRC §[ ] — [principle].

· Treas. Reg. §[ ] — [principle].

· Case law: [Case], [court/year] — [holding relevant].

· Administrative guidance: [Rev. Rul./Rev. Proc./Notice] — [point].

6.2 Authorities — Issue 2

· [Same structure]

6.3 Authorities — Penalties (if asserted)

· IRC §6662 / §6664(c) — [accuracy-related penalty; reasonable cause/good faith].

· Treas. Reg. §1.6662-4 — [standards such as substantial authority; disclosure rules, etc.].

· Case law: [reliance/reasonable cause precedent].

· Administrative guidance: [relevant].

7. Argument and Reasons for Disagreement (Issue-by-Issue Blocks)

ISSUE 1 — [Caption: concise]

IRS Determination: The IRS asserts [summary of agent’s position]. (Ex. A)

Taxpayer’s Position: The correct result is [your conclusion] because [short thesis].

A. Application of Law to Facts

1. [Element/Test Part 1] — [apply facts; cite exhibits].

2. [Element/Test Part 2] — [apply facts; cite exhibits].

3. [Element/Test Part 3] — [apply facts; cite exhibits].

B. Quantification / Computation Provide the taxpayer’s computation with tie-outs:

· Workpaper: Exhibit W-1 (computation)

· Tie-out: [GL/W-2/K-1/return line references]

· Result: IRS adjustment should be $[ ] (not $[ ]) OR allowed in full/part.

C. Contrary Authority (Acknowledged and Distinguished) The IRS may rely on [case/ruling/reg] for the proposition that [adverse proposition]. That authority is distinguishable because:

1. Different controlling fact: [fact difference].

2. Different legal predicate: [test element not met there].

3. Different jurisdictional posture (if relevant): [binding vs persuasive]. Accordingly, even if that authority is considered, it does not control these facts.

D. Hazards of Litigation / Appeals Resolution If litigated, the outcome depends materially on [fact-sensitive points]. Considering hazards, taxpayer proposes [settlement framework].

ISSUE 2 — [Caption: concise]

(Repeat the same structure: IRS determination → taxpayer position → application → computation → contrary authority → hazards/settlement.)

ISSUE 3 — [Caption: concise]

(Repeat.)

PENALTIES — [§6662 or other] (If Asserted)

IRS Determination: IRS asserts [penalty type/rate] based on [basis]. (Ex. A)

Taxpayer’s Position: Penalties should be abated because the taxpayer acted with reasonable cause and in good faith and/or had substantial authority and/or made adequate disclosure, as applicable.

A. Reasonable Cause / Good Faith Facts

· [Advisor reliance details; engagement; competence; full disclosure of facts; contemporaneous memos]. (Ex. P-__)

· [Internal controls; review process; documentation]. (Ex. P-__)

B. Authority Standard

· Identify the standard you satisfy (reasonable basis / substantial authority / more likely than not, as relevant to context).

· Apply the standard to your authorities and facts.

C. Requested Penalty Resolution Taxpayer requests full abatement of penalties for all years. Alternatively, [partial relief] based on [hazards].

8. Requested Appeals Disposition

For the reasons above, [Taxpayer Name] respectfully requests that Appeals:

1. Concede Issue 1 in full (or allow $[ ]),

2. Concede Issue 2 in full/part (allow $[ ]),

3. Resolve Issue 3 as [ ], and

4. Abate all asserted penalties, and make corresponding computational adjustments.

Taxpayer is available for a conference and will provide any additional documentation that Appeals requests.

9. Exhibit List (Formatted for Easy Navigation)

Exhibit A — IRS Examination Materials

· A-1: [30-day letter / RAR / Form 4549 / Form 5701] dated [ ]

· A-2: [Agent workpapers, if provided]

Exhibit B — Taxpayer Background

· B-1: Organizational documents / entity election / minutes

· B-2: Business description, org chart, process descriptions

Exhibit C — Chronology Documents

· C-1: [agreement]

· C-2: [closing statement]

· C-3: [bank records excerpt]

Exhibit W — Workpapers / Computations

· W-1: Computation for Issue 1 (tie-out schedule)

· W-2: Computation for Issue 2

· W-3: Penalty base computation (if needed)

Exhibit P — Penalty Defense

· P-1: Advisor engagement letter and deliverables

· P-2: Contemporaneous memos / emails / meeting notes

· P-3: Disclosure statements (if any)

(Add issue-specific exhibit groups as needed: “R” for research credit projects; “V” for valuation; “TP” for transfer pricing.)

10. Penalties-of-Perjury Declaration (Choose the correct block)

10.1 Signed by Taxpayer (Individual or Authorized Entity Signer)

Under penalties of perjury, I declare that I have examined this protest, including accompanying documents, and to the best of my knowledge and belief, the facts stated in this protest are true, correct, and complete.

__________________________________ [Name] [Title, if entity] [Date]

10.2 Signed by Representative (If Representative Signs Instead of Taxpayer)

Under penalties of perjury, I declare that I submitted this protest and accompanying documents and, to the best of my knowledge and belief, the facts stated in this protest are true, correct, and complete, based on information provided by the taxpayer.

__________________________________ [Representative Name], [Title/Firm] [CAF No.] [Date]

Pattern-Specific “Drop-In” Issue Captions (for your five scenarios)

Use these as Issue headings and then populate the issue blocks above.

1. §41 Credit

· “Whether Taxpayer’s activities constitute qualified research under IRC §41 and Treas. Reg. §1.41-4, and whether Taxpayer’s QRE computation is substantiated and properly allocated.”

2. Conservation Easement

· “Whether the contribution satisfies the charitable contribution requirements (including perpetuity-related requirements) and, if allowable, the proper fair market value; and whether valuation penalties apply.”

3. Partnership Disguised Sale / §752 / §704(c)

· “Whether the distribution constitutes consideration for a contribution under the disguised sale rules; whether liabilities were properly allocated under §752; and whether §704(c) allocations and layers were properly maintained.”

4. S Corporation Reasonable Compensation

· “Whether amounts paid to the shareholder-employee constitute reasonable compensation, and whether distributions should be recharacterized as wages; and whether related penalties apply.”

5. §482 Transfer Pricing

· “Whether the intercompany charges reflect an arm’s-length result under §482 and the applicable regulations, and whether IRS’s selected method and comparables are the most reliable under the facts.”

How to use contrary authority to increase firmness (micro-template)

Drop this into each issue block:

Contrary Authority (Acknowledged). The Service may cite [authority] for [adverse proposition]. That authority does not control because [distinguishing controlling facts], [different test element], and [authority weight/jurisdiction]. Even if considered persuasive, it creates litigation risk for both parties, supporting an Appeals resolution of [your proposed outcome].

This moves you from “arguing” to hazards framing, which is what Appeals is built to evaluate.

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