565 West Adams Street, Suite 600, Chicago, IL 60661
Youtube WeChat Facebook Twitter
The Tax Practice of IIT Chicago-Kent College of Law
The Tax Practice of IIT Chicago-Kent College of Law


Talk to a lawyer now.

Qualified Offers to Appeals

Posted on in IRS

qualified offer, tax court, Chicago Tax AttorneysYour tax return has been audited, and you're reasonably certain that the IRS is (mostly) wrong.  While your inclination might be to take your winning case directly to the Tax Court, there are very good reasons why you should submit a reasonable offer to settle the case before you file your petition starting the litigation.

According to the IRS' own rules, if you make an offer to settle the case administratively (i.e., with the IRS Appeals Division) that is "qualified", and the IRS rejects the offer and you subsequently succeed in the Tax Court, you may be able to recover the costs you incurred in connection with your attempts to administratively resolve the case.

So, what’s a Qualified Offer?  One that is:

  • Made at least 30 days before the case goes to trial in Tax Court;
  • Specifies an amount of liability that you are willing to accept and pay;
  • Designated by you specifically as a Qualified Offer; and…
  • Not withdrawn (by you) before:
    • The IRS rejects the offer,
    • The trial begins, or
    • 90 days go by after the offer is first submitted to the IRS,

Given the high representation expenses typically incurred when dealing with the IRS Appeals Division (and simultaneously preparing for likely litigation), that is a potentially massive amount of money you can save if you are successful in court after submitting the Qualified Offer.  And, there really is not a downside, other than the time and effort it takes to make certain you comply with the requirements.

Details Added by Tax Court

The IRS policy wasn't quite enough for the Tax Court, which added a few restrictions of its own to the Qualified Offer rules. You can still make a Qualified Offer, and still get your administrative costs covered by the IRS without meeting these 'extras.’ However, you must meet these additional requirements in order to have the IRS pay your court-related costs:

  • You must file your petition to have the IRS cover court costs in a timely manner;
  • You cannot unreasonably extend the court case;
  • You must have exhausted all non-court methods of remedying your conflict with the IRS;
  • You may not have a net worth above $2 million when you filed your petition to fight in Tax Court;
  • You must be the 'prevailing party' in the relevant Court proceeding; and
  • You cannot claim unreasonable court costs.

Why Qualified Offers?

You might be asking yourself why the IRS would offer you the chance to make a Qualified Offer and accordingly have your costs paid by them. The answer is surprisingly pragmatic; by offering you the chance to admit some amount of liability and encouraging the IRS itself to not pursue unreasonable cases into Tax Court, the Service actually ends up conserving resources and saving precious (and dwindling) budgeted funds.

Qualified Offers to Appeals can be an effective strategy in dealing with the IRS in Tax Court.  However, you need to make sure you have a strong position on the issues, and one that is presented persuasively to the Service. At Chicago-Kent Tax Clinic, our skilled attorneys have extensive experience working for both the IRS and in private practice. We provide affordable assistance to individuals and businesses for all types of tax controversies. If you need help with a Qualified Offer, or any other kind of tax problem, contact our office today at 312-906-5041.


Back to Top