When can I use Form 12203 instead of a formal written protest?

IRS Publication 5 allows a small case request, which can be made on Form 12203 or by a brief written statement, where the total tax and penalties for each tax period is $25,000 or less in the letter you received. If any one period is over $25,000, a formal written protest is required for all the periods involved. Always follow the procedure set out in your own letter.

Do I have to travel to the United States for an IRS Appeals conference?

No. The IRS states that Appeals conferences are informal and are conducted by correspondence, telephone, video conference or in person. A UK resident can take part by telephone or video, or an authorised representative can attend alone once a Form 2848 power of attorney is in place. Agree the time in writing and state both time zones.

Can my UK accountant represent me before IRS Appeals?

Only if they are authorised to practise before the IRS. Publication 5 says a representative at Appeals must be a person such as an attorney, certified public accountant or enrolled agent. Someone without those qualifications can attend the conference as a witness, which is often useful where a UK accountant can confirm what you were told about US filing, but cannot represent you.

What happens if IRS Appeals upholds the penalty on my late returns?

IRS Publication 4576 says you may seek further review by filing suit in a United States District Court or the Court of Federal Claims, and that most penalties must be paid in full first. In practice that means paying, claiming a refund on Form 843 and, if the claim is refused, considering a refund suit within two years of the notice of claim disallowance.

Is an HMRC penalty appeal subject to the same time limits as an IRS penalty appeal?

The headline periods are similar. GOV.UK says you usually have 30 days from the date of an HMRC decision letter to appeal, and 30 days from a review offer to accept the review or appeal to the tax tribunal. The IRS says you generally have 30 days from its rejection letter. The structure after that differs, because the US court route generally requires payment and a refund claim first.

Missed US Tax Returns: Appealing an IRS Penalty

Q: How long do I have to appeal a refused IRS penalty abatement request from the UK?

The deadline is the one stated in the rejection letter. The IRS says you generally have 30 days from the date of the rejection letter to file a request for an appeal. The period runs from the date on the letter, not the date it reaches a UK address, so allow for international post in both directions and use a tracked service with proof of posting.

Missed US tax returns that are filed late, outside the Streamlined procedures, usually produce penalty notices, and when the IRS refuses a request to remove those penalties the next step is the IRS Independent Office of Appeals. An appeal is requested in writing, normally within the time limit printed on the refusal letter, which the IRS says is generally 30 days. Appeals then takes a fresh look at the facts and the law and can remove the penalty, reduce it or sustain it.

For an American living in the UK the process is workable from London, but it has to be run deliberately. The clock is set by the date on a letter that may spend a week or more in the international post, the conference runs to US business hours, and the evidence sits in UK records an Appeals Officer has never seen. In the cases we handle, the appeal is rarely lost on the law. It is lost on a missed date, a thin protest or late evidence.

Missed US tax returns filed late: which penalties follow?

Two penalties attach to the income tax return itself, and a separate family attaches to the international information returns that travel with it.

The failure to file penalty is 5% of the unpaid tax for each month or part of a month that the return is late, up to a maximum of 25%, according to the IRS page https://www.irs.gov/payments/failure-to-file-penalty which also gives a minimum penalty where a Form 1040 is more than 60 days late: the lesser of 100% of the underpayment or a fixed amount, which is $525 for returns due after 31 December 2025 and $510 for returns due during 2025.

The failure to pay penalty is 0.5% of the unpaid tax for each month or part of a month the tax remains unpaid, and it too is capped at 25% of the unpaid tax, as the page https://www.irs.gov/payments/failure-to-pay-penalty explains. Where both penalties apply in the same month the failure to file penalty is reduced by the failure to pay penalty, so the IRS charges 4.5% and 0.5% rather than 5.5%. After five months the failure to file penalty has reached its maximum, but the failure to pay penalty carries on.

Both penalties are calculated on unpaid tax. Foreign tax credits for UK income tax often reduce the US liability sharply, and where a late return shows no US tax due there is nothing for either percentage to bite on.

International information returns work differently because the penalties are fixed amounts and do not depend on any tax being due. The IRS page at https://www.irs.gov/payments/international-information-reporting-penalties gives an initial penalty of $10,000 for each failure to file a complete and correct Form 5471 by the due date, and a further $10,000 for each 30-day period after a 90-day period following IRS notice has expired, up to a maximum continuation penalty of $50,000. Form 8938 carries the same structure: $10,000 initially, then $10,000 for each 30-day period after the 90 days, up to $50,000.

The Streamlined Foreign Offshore Procedures carry no penalty for those who qualify, and the 5% miscellaneous offshore penalty belongs only to the Streamlined Domestic Offshore Procedures. The notices discussed in this article generally reach people who filed late without using the Streamlined procedures, or who could not meet their non-wilfulness or non-residency conditions.

What is the order of remedies before an appeal?

Appeals is not the first stop. The penalty appeal described at https://www.irs.gov/appeals/penalty-appeal is for a taxpayer who has asked the IRS to remove a failure to file or failure to pay penalty and has received a letter rejecting that request. So the sequence is a relief request first and an appeal second.

First-time abate. This is an administrative waiver, not a judgement on your reasons. The IRS page at https://www.irs.gov/payments/penalty-relief-due-to-first-time-abate-or-other-administrative-waiver says the same return type must have been filed on time for the prior three years, with no penalties in that period other than an estimated tax penalty or penalties later removed for reasonable cause or IRS error. It covers failure to file, failure to pay and failure to deposit penalties.
Reasonable cause. The IRS decides this case by case on all the facts and circumstances, as described on the page https://www.irs.gov/payments/penalty-relief-for-reasonable-cause where the examples it gives include serious illness, death or unavoidable absence, inability to obtain records, fires and natural disasters. Lack of knowledge of the filing requirement, reliance on a tax professional, mistakes and lack of funds are generally not accepted on their own.
Appeal. If the relief request is refused, the rejection letter explains the right to ask for the case to go to the IRS Independent Office of Appeals and how long you have to ask.
Payment and refund claim. If Appeals sustains the penalty, the remaining route is to pay and claim the money back.

The clean three-year history that first-time abate depends on is exactly what a person catching up on missed US tax returns lacks for the later years, so the waiver usually helps with the earliest late year, if at all, and reasonable cause carries the rest. We cover the waiver and the drafting of a reasonable cause statement in separate articles. The point here is that the quality of the original request shapes the appeal, because Appeals starts from the file the IRS already holds.

What is the IRS Independent Office of Appeals?

The IRS Independent Office of Appeals is the administrative appeal function of the IRS, and it is separate from the part of the IRS that assessed the penalty or refused the relief. Its stated mission, set out on the page https://www.irs.gov/appeals is to resolve tax disputes without litigation in a way that is fair and impartial to both the government and the taxpayer. Publication 5 (https://www.irs.gov/pub/irs-pdf/p5.pdf) describes it as the only level of administrative appeal within the IRS.

Three features of Appeals matter in a penalty case.

Independence and the ex parte rule. Appeals protects its independence by prohibiting certain communications with other IRS functions, such as discussions about the strengths or weaknesses of your case, unless you are given the chance to take part. The IRS publications point to Revenue Procedure 2012-18 for the detail.
Hazards of litigation. Publication 4576, the IRS orientation leaflet for penalty appeals, says Appeals will apply the law to the facts and consider any potential hazards of litigation. In plain terms, an Appeals Officer can weigh the risk that the government would lose in court and settle on that basis, which the function that assessed the penalty cannot do in the same way.
Limits. Appeals considers arguments based on tax law, not moral, political or similar objections.

How do you request an appeal of a denied penalty abatement?

You request it in writing and you send it to the address on the letter that refused the relief. The IRS page at https://www.irs.gov/appeals/preparing-a-request-for-appeals is explicit that the protest is not sent directly to the Independent Office of Appeals.

The deadline is whatever the letter says. The IRS states that you generally have 30 days from the date of the rejection letter to file a request for an appeal. The period runs from the date on the letter, not the date it reaches London. IRS post to a UK address can consume a meaningful part of that period, which is why we ask clients to photograph every IRS envelope the day it arrives, and why a Form 2848 already on file is so useful: the representative receives copies of notices.

Small case request or formal written protest: which applies?

The choice turns on a dollar threshold measured tax period by tax period. Publication 5 says that if the total amount of tax and penalties for each tax period involved is $25,000 or less in the letter you received, you may make a small case request instead of filing a formal written protest. A small case request is either a brief written statement listing the disputed issues and why you disagree, or the appeal request form enclosed with the letter, or Form 12203, Request for Appeals Review.

A formal written protest is required where the amount for any tax period is more than $25,000. Publication 5 adds a rule that catches multi-year catch-up filers: if more than one tax period is involved and any one of them exceeds $25,000, a formal written protest must be filed for all the periods involved. The IRS web page on requesting an appeal words the threshold by reference to amounts proposed in an examination, so for a refused penalty relief request follow the procedure in the refusal letter itself.

Publication 5 lists what a formal written protest must contain. It needs a statement that you want to appeal the IRS decision, together with all of the following.

Your name, address and a daytime telephone number.
A list of all disputed issues, the tax periods or years involved, the changes proposed and the reasons you disagree with each issue.
The facts supporting your position on each disputed issue.
The law or authority, if any, supporting your position on each disputed issue.
A penalties of perjury statement in the wording Publication 5 prescribes, declaring that the information in the protest and accompanying documents is true, correct and complete to the best of your knowledge and belief.
Your signature, or your representative's signature, under that statement. A representative who signs uses the alternative declaration Publication 5 provides.

Even when a small case request is available, it is not always the better choice. Form 12203 gives a few lines per issue, which suits a single year with simple, documented facts. It does not suit an explanation that runs across several years, two countries and a change of UK accountant. A fuller statement in the formal protest structure, with a dated chronology, exhibits and the authority relied on, gives the Appeals Officer something to work from and puts the facts on record under a perjury declaration. Where amounts are close to the threshold, or fixed international penalties are also in dispute, we prepare the formal document.

How does the conference work for a UK resident?

Appeals conferences are informal, and they do not require travel. The IRS page at https://www.irs.gov/appeals/what-can-you-expect-from-appeals says conferences are conducted by correspondence, by telephone, by video conference or in person. For a UK resident the realistic options are the first three.

Publication 4576 says Appeals will contact you to confirm it has the case and offer you the opportunity to provide more information or schedule a conference before it decides. The IRS does not publish a fixed turnaround time and we do not quote one.

The non-resident practicalities are where preparation pays.

Time zones. A conference fixed for the Appeals Officer's morning lands in the UK afternoon or evening, depending on which US office holds the file. Agree the time in writing and state both time zones.
Telephone contact. IRS toll-free numbers are designed for callers in the United States, so do not rely on returning a missed call from a UK mobile. Exchange direct numbers at first contact and confirm how documents are to be delivered.
Post. Allow for slow international delivery in both directions and use a tracked service for anything with a deadline. Keep proof of the posting date.
Who attends. You may represent yourself, or appoint an attorney, certified public accountant or enrolled agent authorised to practise before the IRS. If the representative is to attend without you, Form 2848, Power of Attorney and Declaration of Representative, must be in place first. A UK accountant who is not authorised to practise before the IRS can take part as a witness to the facts but cannot represent you.
New evidence. Send UK documents with the protest, not at the conference. Material that appears for the first time at Appeals is likely to be referred back to the function that refused the relief.

What UK evidence supports reasonable cause at Appeals?

An Appeals Officer cannot be expected to know what a UK document is, so each exhibit needs a sentence explaining it. The strongest files are built from records created at the time, by third parties, for a purpose that had nothing to do with the IRS.

HMRC records: Self Assessment tax calculations and tax year overviews showing that UK returns were filed and UK tax paid on the same income throughout the missed years, which supports good faith and shows the absence of any tax motive.
UK medical records: hospital admission and discharge summaries, consultant letters and GP records with dates. The IRS specifically asks for hospital or medical records with dates where illness is the reason.
Correspondence with a UK professional: engagement letters, emails and file notes showing what you asked, what you were told about US filing and when. The IRS treats reliance on a professional as generally insufficient by itself, so this evidence has to show that you gave full information and acted with ordinary business care and prudence.
Proof of prompt correction: the dates you learned of the obligation, instructed a US preparer and filed, set out as a timeline.

The explanation has to cover the whole period of lateness, not just the original due date, and UK terms such as a P60 or an SA302 need a line of translation.

A worked illustration: two late years and two penalty tracks

The following is an illustration only. The figures are assumed for the purpose of showing how the rules interact and are not drawn from a real case. Sterling equivalents use an assumed exchange rate of $1.25 to £1.

Assume an investment banker, a US citizen resident in London for twelve years, files late Forms 1040 outside the Streamlined procedures. For the first late year the return shows US tax of $60,000 after foreign tax credits, filed more than five months late, and the tax is paid 30 months after the due date. The failure to file penalty is 4.5% for five months, or 22.5%, which is $13,500. The failure to pay penalty is 0.5% for 30 months, or 15%, which is $9,000. The total for that tax period is $22,500.

For the second late year the return shows US tax of $90,000, again filed more than five months late, with the tax paid 18 months after the due date. The failure to file penalty is 22.5%, or $20,250. The failure to pay penalty is 9%, or $8,100. The total for that period is $28,350. Across the two years the penalties come to $50,850, or about £40,680 at the assumed rate, before interest.

Her reasonable cause request, based on a serious illness documented in UK hospital records and on written confirmation from her former UK accountant that no US filing was needed, is refused. On the Publication 5 threshold, the first year alone would have qualified for a small case request because it is under $25,000. The second year is over $25,000, and because one period exceeds the threshold a formal written protest is required for both. Her representative files one protest for both years within the period stated in the letter, with the UK exhibits attached.

Separately, she receives a $10,000 penalty notice for a late Form 5471 for a UK company she owns. That penalty has its own notice and its own stated appeal rights.

What happens if Appeals sustains the penalty?

Publication 4576 sets out the position plainly. If you agree with the determination, nothing more is needed in most cases. If you do not, you may request further review by filing suit in the United States District Court having jurisdiction or in the United States Court of Federal Claims, and it notes that most penalties must be paid in full before filing suit.

The usual sequence is therefore to pay the penalty, file a claim for refund, which for penalties is made on Form 843, Claim for Refund and Request for Abatement, and wait for the IRS to act on it. Publication 5 explains that a refund suit generally requires full payment and a timely refund claim, that suit can be filed if the IRS has not responded in writing within six months, and that there are two years from the date of a notice of claim disallowance in which to sue. Publication 5 refers to the district court for the district where you reside, so venue is a point a US citizen living in London should raise with US litigation counsel at the outset.

Why not go to the US Tax Court without paying? Publication 5 describes the Tax Court as generally a prepayment forum, but one that generally cannot be petitioned without a notice or determination letter granting that right. An income tax deficiency leads to a notice of deficiency and a window to petition, usually 90 days, or 150 days if the notice is addressed to a person outside the United States. A proposal of certain information return penalties leads simply to a bill. Many fixed international penalties are assessed that way, without a notice of deficiency, which is why the administrative appeal carries so much weight. There has been litigation over how some of those penalties may be assessed and collected; we have not verified its current status against a court source for this article, so we do not summarise it.

Are collection appeals a separate track?

Yes. A penalty appeal argues that the penalty should not stand. A collection appeal argues about how the IRS is going about collecting a balance. Publication 1660 (https://www.irs.gov/pub/irs-pdf/p1660.pdf) describes two main procedures.

Collection Due Process is available when you receive a notice that carries the right, such as a notice of federal tax lien filing or a final notice of intent to levy. The request is made on Form 12153, Request for a Collection Due Process or Equivalent Hearing, and must be postmarked within the 30-day period described in the notice to preserve the right to go to court. The determination in a timely hearing can be contested in the US Tax Court. The existence or amount of the liability can be raised there only if you did not receive a notice of deficiency or otherwise have an opportunity to dispute it.

The Collection Appeals Program covers a broader range of actions, including lien filings, levies and rejected or terminated instalment agreements. Publication 1660 says it is generally quicker, but you cannot go to court if you disagree with the outcome. Neither track substitutes for a penalty appeal filed in time.

Does interest keep running during the appeal?

It does. The IRS charges interest on penalties, and the date from which interest starts depends on the type of penalty. Publication 4576 states that penalties, up to the maximum allowed by law, and interest continue to accrue on any unpaid balance until the date of payment, and that a payment can be made at any time to stop them. Where a penalty is later reduced or removed, the IRS says it automatically reduces or removes the related interest.

Paying the tax in full stops the failure to pay penalty growing, and paying the assessed penalties while the appeal runs stops interest on them.

How does this compare with an HMRC penalty appeal?

The time limits are similar but the structure is not. GOV.UK guidance at https://www.gov.uk/tax-appeals says you usually have 30 days from the date of an HMRC decision letter to appeal, that for direct taxes HMRC will offer a review once an appeal is made, and that you then have 30 days from the offer either to accept the review or to appeal to the tax tribunal.

The US route after Appeals generally runs through payment, a refund claim and a refund suit, which is the main reason the administrative appeal deserves a full, well-evidenced protest the first time.

What should you do when the refusal letter arrives?

Missed US tax returns do not have to end in a penalty that stands. Record the date on the letter and the deadline it states, check each tax period against the $25,000 threshold, confirm Form 2848 covers every year and form in dispute, and start collecting the UK evidence. Our role is the preparation and compliance work that makes the appeal possible: accurate late returns, a complete UK evidence file and a protest that meets the Publication 5 requirements. If Appeals has already written to you, the date on that letter is the first thing to tell us.