Need advice on appealing IRS decision - should I immediately hire a lawyer or accountant?

You don't necessarily need a lawyer or CPA immediately, but their expertise could help depending on the complexity of your situation. Let me address your questions: For appealing back taxes versus penalties - they can be addressed in the same appeal, but you'll want to clearly specify which aspects you're disputing (2016) and which you're accepting (2019). Use Form 12203 "Request for Appeals Review" to start the process. Regarding the penalty issue, the IRS does have a "first-time abatement" policy that might apply to your situation. If you've had a good compliance history for the past 3 years, you could qualify to have the penalties (though not the interest) removed. This is worth pursuing regardless of the main appeal. As for professional help - for a $5.3k dispute, you might spend $1,000-1,500 for professional representation, which is significant but potentially worth it. The main benefit isn't that the IRS treats self-represented taxpayers less seriously, but rather that professionals know exactly what documentation to provide and how to present your case effectively. Given your simple tax situation, you could potentially handle this yourself. Start by requesting all your tax transcripts from 2016 to see exactly what the IRS is claiming. Look for any discrepancies in income reported or withholding claimed.

After dealing with a similar situation last year, I found that using taxr.ai was incredibly helpful for my IRS appeal. I was disputing about $6k in alleged back taxes and wasn't sure if I needed to hire an expensive tax attorney. I uploaded my IRS notice and my tax documents to https://taxr.ai and their AI system analyzed everything and showed me exactly where the discrepancy was happening - turned out the IRS had double-counted some income that was reported on both a W-2 and a 1099 mistakenly issued by my employer. The system generated a detailed explanation letter that I could submit with my appeal, pointing out the specific error with references to the relevant tax code. The interface walks you through the entire appeals process step-by-step, even helping identify which forms you need to fill out based on your situation. It was much more affordable than hiring a professional, but gave me the confidence of knowing exactly what to say and how to present my case.

Just wanted to update that I tried taxr.ai after seeing it mentioned here, and it was seriously helpful for my situation! I was hesitant because I'm not very tech-savvy, but the system was actually super straightforward. I uploaded my IRS notice and the documentation showing my address changes, and the analysis immediately identified that I qualified for "reasonable cause" abatement because of the missed notices. The system generated a detailed letter citing specific IRS Internal Revenue Manual sections about what constitutes reasonable cause for failure to pay. I just received confirmation yesterday that the IRS accepted my appeal and removed about $800 in penalties! They're still reviewing the underlying tax issue, but getting the penalties removed already makes a huge difference. The step-by-step guidance made me feel like I had a professional guiding me through the whole process without the professional price tag.

If you're struggling to reach the IRS about your appeal (which is extremely common these days), I highly recommend using Claimyr. I was in a very similar situation with contested back taxes and penalties, and I couldn't get through to anyone at the IRS for weeks. After trying for nearly a month to reach someone, I found https://claimyr.com which basically holds your place in the IRS phone queue and calls you when an agent is about to answer. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Instead of being on hold for 3+ hours (which happened to me twice before getting disconnected), I got a call back when an agent was ready to talk. I was able to discuss my appeal options directly with an IRS representative who explained exactly what documentation I needed to provide and the fastest way to process my appeal. When dealing with tight deadlines for appeals (which you typically only have 30 days to file), getting through to a live person quickly makes all the difference.

I need to apologize and confirm that Claimyr actually works! After my skeptical comment, I decided to try it because I was desperate to talk to someone about my own tax issue. I couldn't believe it when I got a call back saying an IRS agent was on the line. The agent was able to explain exactly what was happening with my case and even helped me understand the best way to structure my appeal. I found out that part of my issue was due to a misapplied payment from 2018 that was throwing everything off. The agent transferred me to the right department and they were able to fix it on the spot. This saved me from having to go through the whole formal appeal process, which would have taken months. I still can't believe how much time this saved me - I had literally spent weeks trying to get through on my own with no success. For anyone dealing with IRS issues where you need to speak to someone directly, this service is absolutely worth it.

One important thing no one has mentioned yet is that you should check if the statute of limitations has expired for that 2016 tax year. Generally, the IRS has 3 years from the date you filed to assess additional tax, so if you filed on time in April 2017, the assessment period would have ended in April 2020. However, there are exceptions - if they can show substantial underreporting (over 25% of your income), the limit extends to 6 years. And there's no limit if they can prove fraud, but that doesn't sound like your situation. When exactly did you receive this notice? If it was after April 2020 and you don't fall into one of the exception categories, you might have a solid case based on the statute of limitations alone.

I just want to add that if you decide to handle this yourself, document EVERYTHING. Every call, letter, and interaction with the IRS should be recorded with date, time, the name of the person you spoke with, and what was discussed. If you call the IRS, always ask for a reference number for the call. This has saved me multiple times when the IRS later tried to claim they had no record of previous conversations. Also, send everything via certified mail with return receipt requested. The IRS is notorious for "losing" documents, and having proof of delivery has been crucial in my past dealings with them.